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.

Information that an executor will need to collect

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Collating financial information when someone dies

 

It is the executor’s responsibility to collate all information relating to the deceased’s person’s asset and liabilities. If the deceased left property, a large amount of cash or investments then the executor will need to apply for a Grant of Probate. This will provide the executor with the necessary legal authority to deal with the deceased’s assets and, if relevant, sale of the property.

Before the Grant of Probate can be applied for the executor will need to complete a financial inventory of all the deceased’s assets and liabilities to include: –

  • Property – was this owned jointly with another person? It may be that the deceased owned a share of the property (tenants in common). The value of the property/share must be established by way of an estate agent’s valuation.
  • Bank accounts – obtain a statement that shows the balance at the date of death
  • Shareholdings – obtain the share price for the date of death and multiply this by the number of shares held. If you are unsure how to do this you can speak to a stockbroker.
  • Investments – write to the organisation holding the investment and request a valuation for the date of death
  • Chattels (personal items) of a high value – arrange a written valuation
  • Vehicles – a local garage may value the vehicle or you can use an online valuations website
  • Cash found – if cash is found it must be recorded and held safely by the executor
  • If any utilities have been overpaid by the deceased you will need to record these in the financial inventory as a credit at the date of death

Liabilities

 

When collating financial information, you will need to ensure that you are aware of all liabilities for example: –

  • Utility bills – gas, electric, water, telephone and Council Tax
  • Credit Cards, Store Cards
  • Loans and finance
  • Mortgages
  • Overpayment of pensions and benefits

 

Once you have ascertained all assets and liabilities you are now able to complete either the IHT 205 or IHT 400 form. For more information please contact admin@swwtrust.co.uk

Arranging a funeral

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Arranging your loved one funeral

A funeral may only take place after the death has been registered. There are countless decisions that have to be made by the organiser during one of the most upsetting times of their lives. Often people describe organising a funeral as baffling, terrifying, weird, overwhelming and devastating but many of these emotions can be alleviated if there was a funeral plan in place.

Not everyone wishes to have a traditional funeral, some may choose a humanist funeral, green burial or even direct cremation. So, how do you find your loved one’s directions? If they had a Will they would have provided their funeral wishes or they may have indicated they had a funeral plan and if not, you will have to make these emotional decisions.

Below, you will find a useful checklist for arranging a funeral:-

  • Does the Will/funeral plan provide directions for burial/cremation?
  • Are ashes to be scattered or interred at a specific place?
  • Contact the funeral director, the GP or hospital may provide these details or, you may be aware of a reputable local company. This is a very distressing and emotional part of dealing with the death of a loved one. There are so many decisions to be made for example, where the service will take place and what time, how many cars will be required, will the coffin be pine or oak, chrome handles or gold-painted ones, what music will be played, arrangement for visiting your loved one in the chapel of rest. It may be beneficial to have a family meeting prior to meeting the funeral director so that the above areas can be discussed.
  • How many attendees and organisation of this
  • Order of Service
  • Flowers
  • Newspaper announcement
  • Where will the Wake be held – food, drink and accessibility for attendees

Payment of the Funeral

According to latest research* a funeral arranged in the usual way costs, on average £3,675 and in London, the price of a funeral is almost double the national average.

If your loved one had available funds in their bank account then arrangements can be made for the funeral account to be paid direct from these available funds. Ask the funeral director for a full account and take this to the bank – they will arrange payment direct to the funeral director.

In certain circumstances, you can apply for Bereavement Support Payment – to see if you are eligible call the Bereavement Service helpline or pick up a form from your local JobCentre Plus Bereavement Service Helpline Telephone: 0345 606 0265.

However, you choose to arrange a funeral, you should set a budget that you stick to.

 

 

Type of funeral Average cost* Includes
Direct cremation £1,600.00 Collection of the deceased, a simple coffin, and return of the ashes
Cremation using a funeral director £3,214.00 Collection and care of the deceased, a basic coffin, hearse and managing a simple service; but does not include an elaborate ceremony
Burial using a funeral director £4,136.00 Collection and care of the deceased, a basic coffin, hearse ad managing a simple service; but does not include an elaborate ceremony

Registering a death

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Having a loved one die is turns a familiar world upside down and feelings of grief take over making one feel vulnerable. As a result of death comes legal formalities which are required to be undertaken, these are as follows: –

The Early Stages

Registering the death

It is a criminal offence not to register a death.

The registration process is undertaken by the Registrar of Births, Deaths and Marriages and you should make an appointment with the Registrar once you have obtained the medical certificate of death. A death must be registered within five days (this can be extended to nine days if you advise the registrar that the medical certificate has been issued). If a Coroner is involved you will be unable to register the death until the Coroner’s investigations are completed.

You will need to take the following information with you to register a death: –

  • Date and place of death
  • Full name of the deceased (including their maiden name if relevant) and their last residential address
  • Date and place of birth
  • Their occupation
  • If married, the date of birth of their husband or wife
  • Whether the person was receiving a pension or any other social security benefits

Who registers the death

You cannot delegate the registration of the death to another person

The death will need to be registered by one of the following and in the following order: –

  • a relative who was present at the time of death
  • a relative present during the deceased’s last illness
  • a relative living in the district where the death took place
  • anyone else present at the death
  • an owner or occupier of the building where the death too place and who was aware of the death
  • the person arranging the funeral (not the funeral director)

Removing Unwanted Executors

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Removing Unwanted Executors

 

The role of the executor is chiefly to oversee the estate administration, account for all assets, pay all taxes and liabilities, and ensure that the estate is distributed in accordance with the wishes of the beneficiaries as efficiently as they can.

However, some beneficiaries may grow suspicious of the estate’s executor. They may feel unfairly overlooked and neglected, or believe that the executor is abusing their powers or failing to meet their duties.

The bad news is that removing an executor can be extremely difficult.

If the executor is unwilling to retire from their role, they may need to be removed by a court order. This is particularly problematic if the executor has already successfully obtained Probate in their name and / or received estate assets.

In order to remove an executor, a beneficiary must demonstrate that the executor is failing their “fiduciary duties”– their duties of faith – to the detriment of the estate. This could include poor accounting, mistakes which constitute negligence, loss of the executor’s capacity during the administration, refusing to take notice of beneficiaries, failure to submit tax returns, fraud, or other abuses of power.

If a beneficiary can show sufficient proof of a breach of duty, they can apply to the court for an order to have the executor removed and substituted. Note though, the evidence must demonstrate a clear, specific breach of a fiduciary duty: personal dislike, or vague assertions that the executor may not be acting in accordance with a beneficiary’s own desires, will never be sufficient.

In addition to this, quite apart solid grounds of breach being found, applying to the court will take additional money, time and legal assistance.

It can therefore be considerably difficult to remove an executor. The best advice is to select suitable executors in the first instance. The old adage that “prevention is better than the cure” very much applies to appointment of an inappropriate administrator.

What is a Grant of Representation?

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Many people are familiar with the idea of the administration or probate process; however, most do not actually know what a Grant of Representation is, or that there are different types.

Ultimately, the Grant of Representation is a document sealed and issued by the Court, which provides the Executors or Administrators of an estate with legal authority to access, collect in and distribute the deceased’s assets.

Before issuing the Grant, the Court will look at two elements:

  • Whether or not there is any document which can be considered a testamentary document, capable of being admitted to probate or annexed to a Grant of Administration; and

 

  • Who is entitled to a Grant of Representation of the deceased’s estate (regardless of whether there is any testamentary document).

Once issued, the Grant is effectively conclusive evidence of the terms of any Will and its execution, or that the deceased died without a valid Will. It is also confirms the authority of the Executors/Administrators to act.

There are also different types of Grant of Representation:

Grant of Probate

A Grant of Probate is issued only to an Executor appointed by a Will or codicil. Up to four executors can be named on a Grant of Probate and if there are more than this, power will be reserved to them. Any of the executors named in the Will are authorised to take out the Grant of Probate and deal with the administration of a deceased’s estate.

Grant of Letters of Administration with Will Annexed

This is issued under circumstances where the Executors of a Will appoint someone else to apply for Grant and deal with the estate on their behalf, because they cannot or do not wish to deal with the administration for any reason. A Grant of Probate cannot be issued because the appointed Executors under the Will are not the people applying for the Grant. In this instance, a Grant of Letters of Administration is issued with a copy of the Will annexed. This may also apply where the appointed Executors are minors and require someone else to apply for a Grant on their behalf.

Grant of Letters of Administration

A Grant of Letters of Administration is issued when there is no Will available or capable of being admitted to proof and the deceased therefore died intestate. The order of entitlement to apply for the Grant in these circumstances follows the same order of entitlement as under the rules of intestacy. A personal representative can be appointed to act on behalf of the beneficiaries, however, all of the entitled beneficiaries must generally consent to that person applying for a Grant.

 

 

Generally, a Grant is required before any estate can be dealt with after death, however, there are some circumstances where a Grant may not be required. For instance, there is no need to obtain a Grant where any property is owned as joint tenants and will pass to a spouse or joint owner automatically by survivorship. When some liquid assets held, i.e. bank accounts, investments or policies, are below a specific value then there may also be no need to obtain a Grant. Some banks will release funds in an account up to the value of £50,000; on the other hand, some banks have a lower limit and anything above this means that they require sight of a Grant before they will release funds. This is, of course, purely at the discretion of the individual institution. There is also a common misconception that if you have a valid Will then there is no need for a Grant to be obtained. However, the need to obtain a Grant is ultimately dependent on the assets held by the deceased and the value of those assets, regardless of whether there is a Will or not.

Probate fees increase – further guidance issued

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In response to the recent changes to probate fees, the Ministry of Justice (MOJ) has now issued further guidance to help clarify how the proposed increase in fees will work in practice.

 

A common concern was the “Catch 22” scenario, as outlined in our previous article of 3rd March, whereby Executors would be unable to obtain probate without paying the proposed fee, but would be unable to access the assets in the estate to pay the fee without first obtaining the Grant of Probate.

 

In response to this particular issue the MOJ have advised that Executors will be able to ‘apply to the probate service to access a particular asset for the sole purpose of paying the fee’. It is not yet clear how wide the scope of this access will be, and may not provide any relief where the main asset in the estate is the property, as this must be sold in any event once probate has been granted. It may however be beneficial to Executors handling an estate with significant assets in stocks & shares and investments, as ordinarily such assets cannot be accessed without first obtaining probate, irrelevant of the value of the holding or number of shares held.

 

In addition to the above the MOJ have also advised that it will be possible to submit an early application for probate pending the required approval from HMRC (approval is required by HMRC in cases where inheritance tax is due or the estate is otherwise classed as non-exempt). Any applications submitted before May will not be subject to the proposed fee increase, regardless of how long HMRC may subsequently take to approve any inheritance tax account and provide the necessary clearance paperwork after the implementation of the new fees.

 

Whilst this will certainly be a relief for Executors who are currently in the early stages of estate administration, it is likely that Probate Registries across the country will soon face a barrage of applications over the coming weeks. It is not yet clear whether any measures have been taken to help HM Courts & Tribunal Service cope with the additional workload and continue to provide an acceptable level of service to customers.