Probate. The word has overtones of dusty lawbooks, lawyers’ bills, long delays and Dickensian levels of injustice and dispute.
It should not be that way. Probate is actually about fairness and avoiding legal and tax problems. Losing someone is upsetting enough. It is worse if there are squabbles about how their worldly goods are to be distributed, and worse still if the taxman starts to get involved.
This is why probate has been developed. It may not be perfect, but it does at least provide a framework to deal with the problems as they arise.
A little understanding of what is involved can make things much easier for all concerned.
Probate is a legal and financial process of settling the affairs of someone after their death. It involves confirming the validity of a will, assessing the deceased’s assets and liabilities, and distributing them.
Probate is required if the deceased solely owned property or has a certain amount of money in the bank – each bank may set their own probate thresholds.
It is usually required unless the deceased owned assets worth less than £5,000.
Understanding probate
Probate authorises someone to manage and distribute a deceased person’s estate according to their will (if there is one) or the rules of intestacy (the laws that apply when someone dies without leaving a will).
If a will exists, the executor will usually be named in it. With no will, the court appoints an administrator, usually a close family member.
So, what do you need to do?
First, apply to the Probate Registry for a Grant of Probate, which confirms their legal authority to administer the estate. They must provide documentation and pay the required fees.
You should receive the grant of probate or letters of administration within 8 weeks, although it can take longer if you need to send more information.
The current fee for a Grant of Probate is £273 for all applications, except where the estate is £5,000 or less – in this case, there is no fee to pay.
Next, draw up a detailed inventory of the deceased’s assets and liabilities, including bank accounts, property, investments, debts, and personal possessions. This may require appraisals or professional assessments. This step is crucial for calculating if inheritance tax is payable.
Then, you need to settle any outstanding debts and taxes owed by the estate. This includes paying inheritance tax and settling any outstanding bills.
Finally, once debts and taxes are settled, you can distribute the estate’s assets to the beneficiaries according to the terms of the will or the rules of intestacy.
Some of the possible pitfalls of probate.
As with anything to do with money, there are some pitfalls you may need to be aware of.
Obtaining Grant of Probate can be a lengthy process, particularly if there are complications or disputes. Delays in accessing assets can affect beneficiaries who need financial support.
Inheritance Tax (IHT) can be a big financial burden. If the estate’s value exceeds the IHT threshold (currently £325,000), it is subject to taxation at rates of up to 40%. Executors and beneficiaries must plan for this tax liability and explore options for reducing it.
Legal and Administrative Costs: The probate process involves various fees, including application fees, valuation fees, and legal fees if a solicitor is involved. These costs can erode the value of the estate and impact the amount beneficiaries receive.
Unforeseen Debts: Executors may discover unexpected debts or claims against the estate during the probate process, which can reduce the assets available for distribution.
Disputes Among Beneficiaries: Conflicts can arise among beneficiaries about the distribution of assets, the interpretation of the will, or the appointment of the executor. These disputes can lead to legal proceedings, causing more delays and additional costs.
Do you need help?
You may want help with probate. You can:
- Hire a solicitor or probate specialist to help you with the process.
- Contact the Probate Service, which is a government department that provides information and advice on probate.
- Call us at Continuum. We can help with many aspects of probate, and particularly with tax. We can potentially help reduce the impact of inheritance tax and other taxes on your estate.
We can help put measures in place which aim to keep wealth safe from the taxman, streamline the process of discovering assets – and make the business of probate a little easier. But in most cases, we will need to start that help well in advance. We can work with you or your relatives to help reduce the problems that can be caused by probate. Call us today.
The information contained in this article is based on the opinion of Continuum and does not constitute financial advice, you should seek independent financial advice before embarking on any course of action.
The Financial Conduct Authority does not regulate estate planning, wills, tax and trust advice.
