Administering a deceased person’s estate can be a complicated, emotional and stressful job. The time it will take and the level of complexity and resulting costs will depend upon the nature and size of the deceased’s estate and the terms of any Will or the impact of the rules that apply when someone does not have a Will (the Rules of Intestacy). In exceptional cases, it is possible to complete the administration in four months or so; but a very complex administration could take a number of years. The average estate may take approximately 12 months to administer.
The basic procedure involved includes answering the following questions (please note that this is not an exhaustive list):
1. Is there a Will?
If there is a Will – Who is named in the Will as Executor? They are the person or people entitled to administer the estate, and all the assets of the deceased pass to the executors to deal with.
If there is no Will – The person or people entitled to administer the estate, the Administrator(s), will be, in order of priority:
- surviving spouse or civil partner
- children of the deceased
- parents of the deceased
- brothers and sisters of the deceased
2. Who is paying the funeral account?
If there is the money available, it is usually possible to arrange for the deceased’s bank or building society to pay the funeral account directly.
3. Are there assets that need to be dealt with?
e.g. a house or shares or a bank account for which the bank is asking for a Grant.
If yes – the Personal Representatives (Executors or Administrators) will need to apply to the Probate Court for legal authority to deal with the estate, e.g. to release money held in bank accounts, sell shares, transfer or sell a house. This legal authority is called the Grant of Representation (specifically a Grant of Probate if there is a Will and a Grant of Letters of Administration if there is not a Will).
4. Do you wish to have the help of a Solicitor to administer the estate?
Instructing a solicitor at this stage to help in administering the estate gives the advantage of having an expert to gather the appropriate information and complete the application forms and Inheritance Tax declaration, gather in the assets and carry out the instructions in the Will or follow the Rules of Intestacy. We can also deal with any challenges from HM Revenue & Customs (HMRC) and questions from potentially disappointed beneficiaries.
5. What is the size of the estate and is Inheritance Tax (IHT) due?
A comprehensive picture of the assets and liabilities of the deceased at the date of death is required. Firstly, this means collating documentary evidence such as passbooks, bank statements, share certificates, insurance policies, premium bonds, income bonds, utility bills, council tax bills, water rate bills, the funeral account, etc.
Letters must be written to all asset-holders and the value of each asset obtained, including accrued interest, as at the date of death. We may need to consult a valuer if the deceased owned a house or land, or a stockbroker if there is a shareholding.
Information about any lifetime gifts made by the deceased in the last 7 years of their life should also be gathered as this will affect the available tax free allowance for IHT.
When we have received replies to all correspondence, we will prepare a statement of the estate, which we forward to the Executors or Administrators for their approval.
A calculation of IHT can then be made and arrangements for payment discussed.
6. How do the Executors or Administrators gain authority to deal with the assets?
Authority to deal with an estate is obtained by applying to the Probate Court for a Grant. The application can be made in person to the Court, which may require attending Court for an interview. However, if you have instructed a solicitor to deal with the estate then attendance at Court is not required and the application can be submitted by the completion and swearing of an Oath.
We will prepare the Oath and IHT declaration forms using the approved statement of estate and arrange payment of any IHT due from the deceased’s assets.
We will meet with the Executors or Administrators to go through these application papers and arrange for the Oath to be sworn (which must be in the presence of an independent solicitor).
7. What do you do with the Grant?
Once the Probate Court is satisfied with the application and any IHT due at that stage has been paid, the Court will retain the original Will and issue the Grant and a number of official copies.
The Grant gives the Executors or Administrators the power to withdraw, transfer and sell the assets of the estate. Copies of the Grant plus forms of authority signed by the Executors or Administrators will be sent to the asset-holders requesting release or transfer of the assets held by them.
8. What other responsibilities do the Executors or Administrators have?
Amongst other things, the Executors or Administrators must:
Deal with the deceased’s Income Tax and Capital Gains Tax (CGT) – The Executors or Administrators must settle the deceased’s income tax affairs and CGT affairs to the date of death, usually by making a final tax return to HMRC; and there must be a return relating to income earned during the period of administration of the estate.
Make sure all debts have been paid and beneficiaries identified – All debts that are known of must be paid before any gifts from the estate. There may also be debts or beneficiaries that are not known of. If this is thought to be a risk then the Executors or Administrators should place statutory notices to advertise for such debts or beneficiaries. These notices remain in place for a period of 2 months before they expire.
Check that the beneficiaries are not undischarged bankrupts – If they are then any benefit should be made to the Trustee in Bankruptcy and not to the beneficiary.
9. When should the estate be distributed?
An Executor or Administrator cannot be compelled to make a distribution from the estate until at least a year has passed since the date of death, and more specifically not within six months of the grant being issued. This is because anyone who wishes to make a claim on the estate can do so during this period. However, in some circumstances the estate may be ready to be finalised before the end of the year, and the Executors make a decision about distribution at that time.
Once the estate has received money from the banks, building societies, sale of property etc, all debts should be paid and statutory notices should be allowed to expire before any legacies or payments of the residuary estate are made.
If substantial funds are held, an interim payment may be made to the beneficiaries.
10. When is the administration complete?
Once all assets have been collected, debts paid, tax issues settled, legacies paid and the residuary estate calculated, Estate Accounts will be prepared for the Executors or Administrators to approve. On receipt of approved Estate Accounts, the residue of the estate will be paid out to the Residuary Beneficiaries in accordance with the Will or Intestacy.
The Executors and Administrators must obtain formal clearance from HMRC that all taxes are settled and their file is closed before making final distributions.