Monthly Archives: June 2017

Collecting estate assets and paying estates liabilities and expenses

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Collecting estate assets

When you have received the Grant of Probate this will need to be taken (or posted) to the bank, investment company etc. along with the completed withdrawal form (if required). It generally takes 2-3 weeks for the funds to be received into the executors account (or receipt of a cheque if requested).

*Please note: you will need to set up an executors account to receive the estates assets – this should not be paid into your personal account.

 

Payment of liabilities and expenses

Liabilities that usually arise during the probate and administration process are generally incurred as follows:

  • Liabilities that were outstanding at the date of passing away or due soon thereafter
  • Expenses incurred during the probate and administration period

 

*It is important to note that before any inheritance is distributed to the beneficiaries that all liabilities and expenses incurred must be paid first.

Liabilities should be paid in the following order:

  • Secured creditors – mortgages or loans secured on the property – if the property is not being sold and there is no joint mortgagee then the outstanding mortgage will need to be redeemed from the estates assets
  • Funeral Expenses
  • Testamentary expenses – during the administration of an estate there will be expenses incurred for example, paying for death certificates, probate application fee, insuring the property, professional fees for valuations
  • Wages – if the deceased was an employer
  • Unsecured creditors for example, overdrafts, bank loans, credit and store cards
  • Interest on secured loans
  • Deferred debts for example, loans to friends or family

 

The above liabilities will be paid from the estate (if solvent)

The Grant Application

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The Grant Application

Once you have all valuations for the assets and liabilities in the estate as at the date of death, you have everything you need to begin putting together the application to obtain the Grant of Probate or Grant of Letters of Administration.

The Grant of Probate or Grant of Letters of Administration (collectively known as Grant of Representation) is the legal document issued by the Court (Probate Registry) providing the Executors, Administrators or Personal Representatives of the estate with the legal authority to deal with the deceased’s estate.

A Grant is not always required and there are some instances where the administration of an estate can be carried out without obtaining a Grant. For example:

  • Where a property is held in joint names (joint tenants) and passes by survivorship to the other joint owner(s)
  • Where there are joint bank accounts and only a death certificate is required in order to have the deceased’s name removed from the account and transferred into the survivors sole name
  • Where the amount in any solely held bank accounts is small (banks and building societies have limits as to the value of assets that they will release without seeing a Grant)

There is a common misconception that you if you have a Will, a Grant of Probate will not be required, which is certainly not the case. The need for a Grant is dependent upon the types of assets in the estate and the value of those assets.

Where there is any property owned solely by the deceased or where they own a specified share in a property (as tenants in common), then a Grant will always be required in order to sell or transfer that property/share of that property.

 

 

 

 

For clarity, there are two ways of owning property and how the property is owned will depend upon how the property is dealt with upon death:

  • Joint Tenants – this is where each owner owns the whole property and there are no defined shares. Upon the death of one owner, the property automatically passes to the surviving owner(s).
  • Tenants in Common – this is where each owner owns a defined share of the property. When one owner passes away, their defined share will be dealt with in accordance with provisions in their Will or under intestacy and a Grant of Probate is required to deal with this share.

 

There are several elements required by the Probate Registry, which make up the Grant application as a whole:

  1. Completing the forms

As part of the application you must complete the relevant inheritance tax forms by including all details of the assets and liabilities in the estate.

There are two main forms:

IHT205 – This is the standard tax form and is used where there is no inheritance tax to be paid or where everything passes to the spouse of the person who has passed away.

IHT400 – This is the form used predominantly where there is inheritance tax due and is submitted along with the relevant schedules and supporting documents.

You will need to complete and submit tax forms for the estate regardless of whether there is likely to be tax due or not. It is important that all date of death figures are included in the forms and that the figures are as accurate as possible. There is a risk that you may get a penalty if any of the information on the form is inaccurate.

  1. Swearing the Oath.

The Oath is a document that contains all the necessary information to support the application and also sets out the legal requirements expected of the holder of the Grant (Executor/Administrator).

The Oath should be sworn at the office of a local solicitor or a commissioner of oaths and there is usually a charge of around £7 – £10 for swearing the document. The document is ultimately a promise that the information you have given is true to the very best of your knowledge.

Where the deceased has left a Will, this will also need to be taken along with the Oath and sworn.

It is important to note that the original Will is retained by the Probate Registry when the application is submitted.

  1. The application

Once you have completed all the relevant forms and have sworn the Oath and Will, you are then ready to submit the application to the Probate Registry. There are district probate registries and probate sub-registries around the country. You should generally submit the application to your nearest registry, however, there are no restrictions on which registry you submit the application to.

The Grant can take any from 2 – 4 weeks to receive back from the Probate Registry, assuming there are no complications with the application.

 

Distribution of an estate

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Distribution of the estate

Once you have collected in all estate assets and settled all the estates tax affairs and any outstanding liabilities or disbursements, you will then be able to begin distributing the estate in accordance with the terms of the Will, or in line with the rules of intestacy.

Distribution of any estate assets is provisional upon the expiry of the Statutory Notice to Claimants. This is where a notice is placed into the London Gazette and into a local newspaper and lasts for a period of 60 days. The purpose of this is to give any claimants or creditors 60 days to make a claim against the estate, after which the estate will have some protection against any claims that arise in the future. It is not recommended that the estate is distributed or finalised until after this 60-day period expires as it will protect the Executors/Administrators from any liability in the future.

Before any distributions, it is also recommended that you obtain identification for each beneficiary (generally photographic ID and proof of address will suffice), so that you can confirm and prove that each beneficiary is exactly the individual referred to under the Will or entitled under intestacy.

  • This is particularly important where any beneficiaries are referred to by ‘nicknames’ under the Will or where beneficiaries have become married, meaning that their name will differ from that in the Will.
  • This will prevent any uncertainty and will prevent distributions being made to the wrong individuals, as the Executor/Administrator will ultimately be liable should this be the case.

Any specific gifts or pecuniary legacies set out in the Will should be distributed first and can therefore be distributed at this point.

  • It is recommended that any payments of pecuniary legacies to any beneficiaries should be made by either cheque or bank transfer. This is because these are both traceable and can be referred to and proven at a later date should any queries arise.
  • You should ideally get some form of receipt from each beneficiary to confirm that each has received their entitlement under the estate.
  • If there are any gifts or legacies due to a beneficiary who is a minor it is sometimes possible to pay their legacy to their parent or guardian, who can provide receipt on their behalf, depending on the wording of the Will. Alternatively, where this is not possible, funds will need to be held upon Trust for any minors until they can provide valid receipt.

At this point, any property that has not already been sold or dealt with or any property specifically gifted to a beneficiary in the Will, can be transferred into their ownership.

  • It is recommended that you seek assistance from a conveyancing solicitor to transfer any property to any beneficiaries.

If there is direction in the Will that assets should be held under a Trust, then you will need to arrange for the Trust to be drafted and registered.

  • Unfortunately, the drafting and setting up of any Trusts is a reserved activity and you will need to contact a professional for advice and services in respect of this.

Finally, before any distributions are made to any residuary beneficiaries, you should put together estate accounts.

  • The estate accounts should outline all assets and liabilities in the estate, along with any payments that have been received in or paid out of the estate.
  • The accounts are generally required so that each residuary beneficiary may see exactly how much they can expect to receive under the estate.
  • Once completed, each residuary beneficiary and any other Executors should receive a copy of the accounts and approve them (it is advisable for each beneficiary to provide you with their written approval of the accounts).
  • Only once the accounts have been approved should you make any final distributions to the residuary beneficiaries. Again, you should ensure that you distribute any funds by way of a cheque or bank transfer so that any payments are traceable and you should obtain a receipt from each beneficiary to confirm that they have each received their entitlement under the estate.

Once all distributions have been made and all matters have been finalised for the estate, you should ensure that all documentation and paperwork in relation to the administration is kept in a safe and secure place. Do not destroy any of the documentation as it may be that you will need to refer back to the paperwork in the future. Professional companies and legal bodies are legally required to keep and store files and paperwork for a minimum period of 7 years, so this may be something to consider.

Preservation of assets

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Preservation of Assets

When someone passes away, it is important to make sure that the relevant people, companies and organisations are informed. You will also need to ensure that any assets of the deceased are preserved until such time when they can be collected, sold or distributed.

Informing the appropriate companies and organisations about the death of a friend or relative can be an emotional task at an extremely difficult time. However, doing this as soon as possible will help prevent any overpayments to or from the deceased into or out of any bank accounts; particularly any overpayments of benefit from any government organisations. It will also allow companies to put any accounts on hold and will provide you with more time to deal with assets and any liabilities in the long run.

Companies you might need to inform include:

  • Any government organisations (HMRC, DWP, DVLA, Passport Office, local council)
  • Banks, mortgage, pension or insurance providers
  • Investment companies or share registrars
  • Utilities (gas, electricity, telephone, broadband, water & sewage, TV licence)
  • Any other companies who you think might need to know (care companies, landlords, subscriptions or memberships, employers, health professionals)

You may call, write to or email companies and organisations to inform them of a death and most will require a copy of the death certificate for their records.

Some organisations offer assistance to make the process as smooth and as straightforward as possible. For example, when you register the death, often the registrar will ask whether you would like to use the ‘Tell Us Once’ service. This is a service that allows you to report a death to most government organisations in one go and helps to prevent overpayments. The registrar will either complete this service for you at the time of your appointment, or will provide you with a unique reference number to access this service You can also access this service online at:

https://idp-death-tellusonce.direct.gov.uk/Death/Enrich/BeforeYouStart

Information you will need to assist you in reporting the death includes:

  • Date of birth
  • Date of death
  • Address
  • National Insurance number
  • Any relevant reference numbers
  • Occupation
  • Marital status

Once informed, any bank accounts will be frozen, which will help preserve and protect any funds.  However, this will obviously also mean that any direct debits or standing orders will not be paid, so it is important that you ensure that all affected companies are informed.

 

Whether the deceased owned or rented a property, it is crucially important that steps are taken to preserve both the property itself and the assets and personal possessions kept inside the property:

  • If the property is owned, make sure that adequate insurance is in place for the building and its contents. If the property is unoccupied, make sure the insurance policy provides cover for this.
  • Ensure that all door locks and windows are secure.
  • Make sure that keys are kept in a secure place and that you are in possession of any other sets of keys or at least aware of who else may has a set of keys to the property.
  • Do not allow anyone to enter or remove anything from the property without consent.
  • Make note of any valuable items at the property (remove these or store these in a secure place if possible)
  • Gather all relevant paperwork together which will assist you in contacting the relevant companies and organisations to inform them of the death.
  • Also gather all original documents such as birth certificates, death certificates, marriage certificates, divorce papers and any Deed poll documents.
  • In Winter months ensure that heating is left on low or the system is drained down to prevent water damage and comply with insurance.

Once you have done all of this, you will have the relevant paperwork and information to allow you to begin dealing with the administration process for the deceased’s estate.