We understand that dealing with a loved one’s estate can be daunting. We take a look at some of our clients’ frequently asked questions about probate.
What is probate?
When a person dies leaving assets and property, these need to be dealt with and distributed according to the will. Alternatively, if the deceased has not left a will, according to the rules of intestacy. The administration process is called probate.
The term probate is also used when a grant of probate is required. A grant of probate is an official document granted by the probate registry. It gives executors authority to collect in the estate. Financial institutions will often request sight of this to close down or transfer assets.
If the deceased left a will and named executors, the executors will be the people who will deal with: ascertaining the estate; paying any tax; applying for the grant of probate; collecting the assets and distributing the estate in accordance with the terms of the will.
If there is no will, anybody who is entitled to share in the estate under the rules of intestacy can step forward and apply for letters of administration. They would then be called an administrator.
The collective name for a grant of probate or letters of administration is a grant of representation.
Will a grant of representation always be required?
Not always. Whether an institution such as a bank or building society requires a grant of probate or letters of administration is the decision of the individual financial institution. The limits before a bank requires a grant of representation vary and are at each bank’s discretion. Where the bank requires it to close the account, you should send a sealed copy to the bank along with their relevant closure form. Share registrars do usually require a grant of probate.
In some situations, the deceased will have held land or property in their sole name. You will always need a grant of probate or letters of administration to sell or transfer the land or property into the new owners’ names.
How do I apply for a grant of representation?
When applying for a grant of representation, the applicants must swear an oath in front of a solicitor or commissioner for oaths. You will need to submit the oath to the probate registry; along with an inheritance tax return, the original will (if there is one) and a court fee.
In order to obtain the grant of representation, you will need to pay any inheritance tax.You can do this by one payment or by instalments in certain circumstances when a lump sum payment isn’t possible. In order to calculate the amount of IHT, you will need to complete the HMRC form IHT400. You may also need an IHT400 form when tax is not payable but the estate holds certain assets, such as foreign or business assets. On smaller and certain exempt estates, you will need to submit HMRC form IHT205 in order to obtain the grant of representation.
What is the limit before I have to pay any Inheritance Tax?
Everyone is entitled to their own nil-rate band. This is the value of a person’s estate before any tax will be payable; in other words the inheritance tax-free allowance. This amount is currently £325,000.
When spouses leave their estates to one another, on first death their estate will be spousal exempt and not taxable. The surviving spouse will be able to claim their deceased spouse’s nil-rate band when they die. This brings the total nil-rate band up to £650,000. There is also an additional allowance where anyone who dies leaving property to their children or to their descendants will also be able to claim a residential nil-rate band. This is currently £100,000 but increasing each tax year up to £175,000 in 2020/2021.