Probate & administration of an estate

Probate & administration of an estate

The death of a loved one can be a very difficult time and the administration of their estate, whether there is a Will or not, can be very daunting.

Shoosmiths have 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 of administering their assets fall to their personal representatives. These individuals are either appointed under the Will of the deceased (called executors) or by operation of law if there is no Will (called administrators). Personal representatives is a generic term covering both executors and administrators. In addition the appointment of executors in a Will may fail and again the law will dictate who the personal representatives can be.

Where there are executors appointed, the legal title to all the assets of the deceased will vest in those executors meaning that only these individuals 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 substantive steps in the administration.

The first job of a personal representative is to establish what assets make up an estate and then to safeguard those assets. This will include securing the property and its contents, ensuring no third party attempts 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 more than just looking at a recent bank statement or getting the local estate agent to call round to provide a free market appraisal and we can advise on the issues relating to valuing different classes of assets. Private company shares for example may give rise to particular difficulties.

The value of an estate also includes gifts the deceased made in the seven years leading up to the date of their death and 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 and HM Revenue and Customs can take punitive steps if it is found that incorrect valuations are reported. This can include interest on the additional tax now due and penalty fines.

Once the value of an estate has been established, a return will need to be made to HM Revenue and Customs. If inheritance tax is payable an element of it must be paid before the grant can be issued. This can prove difficult for some estates where there is little liquidity and loans may be required. There are strict rules surrounding the payment of inheritance tax and we can advise on this as well as the time limits imposed.

When preparing the report to HM Revenue and Customs 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/charity and business assets.

Following the inheritance tax position being established the application for the grant of representation can be made. The issuing of the grant will extend the powers of the personal representatives and allow them to start closing down the larger bank accounts, deal with share portfolios and sell the 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 estate is intestate the personal representatives will also need to work out who is entitled to the estate. This can be straightforward but in some families this will necessitate the employment of genealogists to correctly draw up the family tree. This will not only ensure that the estate is distributed correctly but protect the personal representatives from personal liability.

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, what has been paid out, what assets have gone up in value and those that have gone down.

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 HM Revenue and Customs. All 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 the estate is administered correctly and efficiently whilst protecting the position of personal representatives at what can be a very challenging time.