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Six steps to managing the estate of a family member or friend after they’ve died

The death of a close friend or family member can be distressing. Despite this, the responsibility of funeral arrangements and handling some of the practical tasks, in particular the administration of the estate may fall on you, so it’s important you know what to do.

Tracing the will: The first practical step to take is to track down the last will made by the person who has died. This is to ensure their latest wishes are followed. There is no national database of wills, so the first place to start would be amongst their personal belongings and papers.

It may be that they used a solicitor or bank to write their will. Either might be storing it on their behalf. Therefore check with any solicitors or banks used by them. Also check with their close relatives and friends. This is because they may have asked one of them to take responsibility for carrying out the instructions made in their will (known as the executor). If they did that person may know where the will is kept.

The will then needs to be checked to ensure it is legally valid  and prepared in accordance with the applicable rules, such as being made without the person who died being put under pressure, whilst they had the necessary mental capacity and was properly signed and witnessed.

Deciding who’s responsible for sorting everything out: The person or people (known as the executor or executors) with this role need to be identified. They will have legal authority to administer the estate of the person who died. This means they are responsible for sorting out their property, possessions, investments, money and debts:

If the person who died left a will they will usually have named the person or people they wanted to take on this role and carry out their wishes in accordance with their will. The person appointed is called an executor.
Where there is no will, the law sets out rules to determine how everything should be sorted out and who should get what. These are called the intestacy rules.  Under these rules, it will usually be the nearest blood relative who takes legal responsibility for administering the estate. They are called the administrator and will need to be formally appointed by the court.

Register the death: The person taking legal responsibility (executor if there is a will or closest relative if there was no will) should contact the registrar of births, marriages and deaths. It is the registrar responsible for the area in which the person died, who needs to be contacted. Their details can be found in the phone book or online. The staff at the registry office will help with the process.

Funeral arrangements: Once the will is found, it should be checked to see if there were any special requests made concerning the funeral arrangements. There may also be details of a pre-paid funeral plan stored with it. If not, your local funeral directors will be able to help with issues such as the service, floral tributes, making arrangements for burial or cremation, newspaper announcements and arranging a reception or wake (including catering). After a burial they can give advice on having a headstone. Where the estate has sufficient funds, it can be used to pay for the funeral before other debts are paid.

An important aspect of estate administration is to ensure everything owned by the person who died (called their assets) is traced and valued.

Their estate is calculated as the total of their assets less their debts.

This is a list of the main areas which need to be investigated:-

  • Their money – cash, bank accounts, pension payments and savings. Some financial institutions will release the funds without waiting for the formal “Grant” from the court (explained at step 4); this may mean money is available to pay for the funeral.
  • Their investments (such as stocks and shares), life insurance policies and business interests – obtaining a valuation as at the date of their death.
  • Their personal possessions – some of which may require a specialist valuation.
  • Their land and property.
  • Whether in their last 7 years they made any gifts or set up any Trust Funds (as either may alter the inheritance tax that is payable)
  • Details of any money or property owed to the person who died.
  • Details of all debts, loans and liabilities they owed to others. This can include household bills, credit cards and mortgages (that will need to be repaid). Often a repayment holiday can be agreed to prevent unnecessary increases in what is owed.

However if they were married their estate does not include any property which is jointly owned with their husband or wife or civil partner. That passes automatically to the person they were married to and does not form part of the estate of the person who died.

Also, everyone who will receive a gift or other benefit under the will or Intestacy Rules needs to be traced. These are called beneficiaries. If a beneficiary cannot be traced, it may be necessary to instruct a tracing agent.

Establish if there are sufficient funds: Following these investigations, the estate can be valued.  Part of this is to see what will be left after the debts (left by the person who died) are paid off.

If there is a will, this will enable a calculation to see if the estate is sufficient to meet all of the gifts set out in the will. If not, special rules apply about how the available funds should be distributed. If this happens, we can provide the additional legal advice that will be needed on varying the distribution to those expecting a gift from the will.

With the estate valued, the inheritance tax return needs to be completed to assess how much tax must be paid. Care is needed to make sure debts and applicable allowances are claimed to keep the tax bill to a minimum.

The executor or administrator is responsible for getting this right. For some this can be quite a burden. This is why many will take specialist advice from a solicitor or other advisor. This is a service that QualitySolicitors is happy to provide, the cost of which is usually paid by the estate rather than by the executor or administrator instructing us.

The first instalment of inheritance tax is likely to be legally due to be paid at this stage, six months after the date of death.

It may be possible to access sufficient cash to pay this liability, alternatively it may be necessary to arrange a loan.

There can be quite a lot of correspondence and negotiations with HMRC regarding how the tax rules should apply to the estate.

There will usually also be income tax returns to be completed for the final year of the person’s life (and sometimes HMRC will require income tax from previous years too). There may also be capital gains tax returns needed.

Where the estate consists of just money (cash or bank accounts), it may not be necessary to apply to court for what is called an Official Grant. That is because some banks and financial institutions will release the funds of up to £15,000 that they hold (on behalf of the person who died) without requiring the Official Grant. This does vary.

Where a bank or financial institution does require an official Grant or where the estate consist of more than just money held in cash or in a bank account, an Official Grant will be needed in order to collect in the assets (everything the person who died owned).

To get this Grant it is necessary to apply to the court (called the probate registry) to be formally appointed and given authority to represent the person who died.

  • Where there was a Will, a Grant of Probate can be made to the person, people or legal representatives named in the last Will as the executor.
  • If the person died without leaving a will then a Grant of Letters of Administration can be made to the closest blood who applies under the Intestacy Rules that will apply.

When we are instructed to make the application on behalf of the executor or administrator, it usually takes about 10 days for the appointment to be made. Part of our service includes preparing the necessary paperwork, such as the oath and forms of authority to enable us to collect in the estate.

Whilst many people prefer to instruct a solicitor to make the application, it is possible to apply yourself. However the process takes longer as you may need to attend in person for a court interview. You will be asked to commit to the court that you will properly administer the estate in accordance with the law. You will also be asked to take personal financial responsibility (known as personal liability) if you make mistakes. This is known as swearing an oath for executors or administrators.

The Grant permits the executor or administrator (or solicitors acting on their behalf) to collect in the assets of the person who died and to start to process them, including using the money collected to pay off debts owed by the estate:

Collect in the money: Bank accounts, pension payments and savings from those financial institutions who will only release the money held after a certified copy of the grant is available.

Collect in the investments: This includes selling or transferring stocks and shares, and collecting in life insurance policy payments and business interests.

Recover any payments due: Where the person who died was owed money, this then needs to be recovered. Sometimes this requires separate legal action.

Pay bills and debts: Where the person who died owed people or institutions money these need to be paid from the money collected in.

Final tax returns: The preparation of final tax returns and payment of the tax now due – income tax, capital gains tax and inheritance tax.

 

Advertise for creditors of the person who died: Before the estate is distributed to those who should benefit, it is important to make sure that no one is still owed part of the estate of the person who died. Place a notice in The Gazette to give creditors the chance to claim anything they’re owed. If the estate is then distributed 2 months later, the executor or administrator should be protected from personal liability (for not first paying a creditor - if they only come forward afterwards).

Deal with any legal action: Sometimes the validity of the will may be challenged. This could include the following reasons:

  • The will has unfairly and unexpectedly left someone out (without there being an understandable explanation).
  • The will or the intestacy rules (that apply where there is no will) do not make 'reasonable financial provision’ for someone who was reliant on the person who died.

It is important to remember that the executor or administrator can be found to be personally liable where an estate is wrongly distributed. This is why solicitors are often instructed to shoulder that responsibility.  Where there is a legal challenge, to avoid personal liability, it is advisable to resolve any legal action before the estate is distributed. Taking legal advice on any such challenge is recommended. QualitySolicitors have lawyers specialising in this area who would be pleased to advise.

Sell or transfer personal possessions: Having valued the possessions, arrange to either transfer these to the person due to benefit under the will (or under the intestacy rules if there is no will) or (depending on the instructions) sell them. It may be necessary to instruct an auction company.

Sell or transfer land and property: Depending on the nature of the estate it is often necessary to instruct solicitors to work with the Land Registry to transfer land or property into the name of the person who is to benefit or to sell it. This can also include using a house clearance company and working with estate agents.

Make an interim distribution: As the money is collected in, the rules which apply may allow some of the money to be passed onto those who are due benefit.

Administer trusts: Sometimes the will (or rule of law) will mean a gift cannot be simply transferred to the person due to benefit. It may be that they have only been given the benefit for their lifetime (such as a life interest in living in a property) or a gift is to be held on trust until a specified event (such as a child turning 25 or marrying). Wherever a trust or life interest has been created, it must be administered in accordance with the applicable provisions and specialist advice may need to be taken.

One of the last jobs is to prepare the estate accounts. This is the official record of the estate – what came in, what was paid out, interest earned and what happened to the rest.

Once these have been approved it is then possible to make arrangements for the final distribution to beneficiaries (those due to benefit from the remainder of the estate under the provisions of the will or under the intestacy rules).

Each person benefiting from a gift should be provided with a tax certificate detailing the amount of income included in what they received, so they can take this into account in their own tax affairs.

The final step in winding up the estate is obtaining closure letters from HMRC in connection with the tax paid – confirming the estate administration is now complete.

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