What to do when someone dies?

The death of a relative or close friend is a difficult time even before you start thinking of dealing with the deceased’s financial affairs. Most people will never have been involved with an ‘estate’ previously and can become confused by a host of legal terms and procedural matters.

The process of winding up an estate can be completed quite quickly – in a matter of months – if the Will is clear, if there is not much property involved, and the whereabouts of those entitled to it are known – and there are no disputes. It can take much longer, sometimes years, if, for example, beneficiaries cannot be traced. It can also take longer if a house has to be sold or there are tax questions to resolve with HMRC. Saving your executor or administrators time, trouble, and expense are all reasons why it is important to leave them a helpful, up to date Will and clear records of your property and beneficiaries details.

Literally, probate means “proof” that a will is valid. Strictly speaking the term probate only applies where the deceased left a Will, but (despite the fact that most people actually die without leaving a will) the term has come to be used to refer to all estates.

The grant an executor gets is called the grant of probate, and an administrator’s grant is called letters of administration. Both grants have broadly the same purpose and effect.

Acting as a executor or administrator is an important obligation, but a close friend or family member either alone or with a solicitor is often the right choice. The law takes the subject of acting as a executor or administrator (or trustee) very seriously, so much so that there are several Acts of Parliament and many other legal requirements dealing with their rights, duties and obligations. It is not difficult to see why, since executor or administrators and trustees may have control over large sums of other people’s money. However, many of these rules and regulations are designed to ensure that beneficiaries can get compensation if the executor or administrator turns out to be dishonest or careless; the normal honest and conscientious executor or administrator would regard them as common sense, and highly desirable in the interests of the beneficiaries.

It is also important to consider Inheritance Tax (IHT). Before probate is granted, the executors or administrators are required to make a return of capital assets to the tax office for the purposes of Inheritance Tax (often called death duties). It is necessary to ascertain the value of each asset, such as bank and building society accounts, insurance policies and stocks and shares, or in the case of freehold or leasehold property and furniture and jewellery, to obtain a professional opinion as to its value.

It is also necessary to consider financial transactions made during the deceased’s lifetime because if these are in the nature of gifts they may need to be disclosed for Inheritance Tax purposes. Similarly, any jointly held assets or other property in which the deceased had a financial interest, such as a partnership, business or trust, must be considered as they may need to be included when Inheritance Tax is assessed.

Very briefly, the first £325,000 of any estate on death is subject to inheritance tax at 0%. This is called the Nil Rate Band (NRB). Prior to 9 October 2007, married couples were advised to make best use of both their NRBs, rather than the whole estate passing under the spouse exemption on the first death. This involved including nil-rate band discretionary trusts in their respective wills which often resulted in complex arrangements.

In October 2007, the government introduced the transferable nil-rate band (TNRB), which provides that the unused proportion of the first to die can be passed to the survivor so a maximum of £650,000 can be charged at 0% on the second death.

Couples with existing nil-rate band discretionary trusts should take advice before deciding to redraft their wills, as the flexible nature of the nil-rate band discretionary trust may have other benefits and can offer solutions to complex family arrangements, and also may offer some level of asset protection.

There are also plans afoot to introduce a new residence nil rate band (RNRB) for deaths after 6 April 2017 when a residence is passed on death to a direct descendant. It looks like it will be phased in over a 4 year period up to 2021 up to a maximum additional nil rate band of £175,000 per individual – but this is not yet in force, so watch this space!

The completion of the IHT papers on death can be tricky for executors or administrators and if not completed correctly, can result in penalties being incurred. Often executors and administrators employ a solicitor to help and also take other specialist advice (such as an accountant or stockbroker) when they do not have the necessary expertise themselves.

There are many other aspects involved in the administration of an estate including the gathering in of the assets, payment of all debts and liabilities, resolution of the deceased income tax affairs, placing adverts for unknown creditors or claimants, consideration of foreign assets and even the deceased’s domicile – before the beneficiaries receive their shares of the estate. Prince Evans has a strong team of solicitors specialising in all aspects of the administration of estates and inheritance tax and they would be delighted to assist you.

Suzanne Mynors TEPSuzanne_Mynors



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