Shoosmiths has a team of professionals who can help ease this burden and guide you through what can be a complex process.
When a person dies the responsibility for administering their assets falls to their personal representatives. These individuals are either appointed under the Will of the deceased (in which case they are called executors) or by the operation of the law if there is no Will (in which case they are called administrators). ‘Personal representatives’ is a generic term covering both executors and administrators. In some cases the appointment of executors in a Will may fail, in which case the law will dictate who the personal representatives will be.
Where there are executors appointed, the legal title to the deceased person’s assets will vest in those executors meaning that only they can deal with the assets. Their power derives from the Will. In the case of administrators, their power derives from the grant of representation and so until such time as the grant is issued, they are unable to take any major steps in the administration of the estate.
The grant of representation is a document issued by the Probate Registry to prove the legal authority of the person (or persons) who is entrusted to deal with the deceased person’s estate. It is often necessary to get a grant of representation in order to deal with the deceased person’s estate, for example, to transfer or sell property and/or to close bank accounts.
The first task of a personal representative is to establish what assets make up the estate and then to safeguard those assets. This will include securing a property and its contents and ensuring that no third party attempts are made to close bank accounts or claim insurance policy proceeds to which they are not entitled. Personal representatives must also prevent loss to the estate.
Once the assets have been established, it is the personal representative's job to value those assets as at the date of death. This is often more complex than just looking at a recent bank statement or getting the local estate agent to provide a free market appraisal and we can advise on the issues relating to valuing different types of assets. As an example, private company shares often give rise to particular issues.
The value of an estate also includes gifts the deceased made in the seven years leading up to the date of their death. It may also include any interest they have in a Trust.
It is important to accurately value an estate to establish whether or not there is any inheritance tax to pay. HM Revenue and Customs (HMRC) can take punitive steps if it is found that incorrect valuations are reported. This can include interest on the additional tax due and penalty fines.
Once the value of the estate has been established, a return will need to be made to HMRC. If inheritance tax is payable, some or all of the tax may need to be paid before the grant of representation can be issued. This can prove difficult for some estates where there is little liquid cash available, and short term loans may be required in order to pay the tax. There are strict rules surrounding the payment of inheritance tax and we can advise on this as well as the relevant time limits.
When preparing the return for HMRC, it is important to include all the correct allowances and reliefs to avoid paying more inheritance tax than necessary. For example, reliefs may be claimed on agricultural property, gifts to a spouse or charity and business assets.
Once the inheritance tax position has been established, the application for the grant of representation can be made. The issuing of the grant of representation will extend the powers of the personal representatives and allow them to close bank accounts, deal with share portfolios and sell any property amongst other things.
It is the responsibility of the personal representatives to pay all outstanding liabilities, settle the deceased's tax position (including the income tax position up to the date of death), pay all legacies, distribute the estate in accordance with the Will and establish any Trusts.
If the deceased person died without a Will the personal representatives will also need to work out who is entitled to the estate. This can be straightforward but in some cases this will necessitate the involvement of genealogists to correctly draw up a family tree. This will not only ensure that the estate is distributed correctly but protect the personal representatives from personal liability and future claims.
Upon completion of the administration, the personal representatives are required to produce estate accounts to show the value of the estate at the date of death, the payments that have been made, the assets that have increased in value as well as those that have decreased.
For some estates the process of administration can be straightforward but there are many problems that can arise such as missing beneficiaries, difficulties establishing the assets, claims from disgruntled beneficiaries and having to negotiate with HMRC. All of these issues can leave the personal representatives open to personal liability.
At Shoosmiths we have a team of highly qualified advisers to assist and guide you through the process, ensuring that the estate is administered correctly and efficiently whilst protecting the position of the personal representatives at what can be a very challenging time.
Probate & administration of an estate is part of Shoosmiths’ wider private wealth offering. If you would like help finding the right team or lawyer please contact us on +44 (0)3700 863 000 or contact us by email to [email protected].