A guide to administering the estate of a deceased person
This is intended to be a simple guide to the procedures that are involved in the administration of an Estate of someone who has died. Being aware of the steps that need to be taken will help you to understand all that needs to be done before and whilst the Estate is administered and distributed, and approximately how long it will all take.
The process may be divided into six basic stages:
- Action to be taken immediately following Death
- Preliminary Meeting and Fact Finding Exercise
- Application for Grant of Probate / Letters of Administration
- Gathering in the Assets and Completion of Tax Return
- Preparation of Final Accounts
- Distribution to Residuary Beneficiaries
It should be noted that it can take up to one year before the final distribution is made to the residuary beneficiaries in Estates where Inheritance Tax is payable, and where a very large Estate is involved or where the administration is complicated it may take longer. Possible complications include disputes as to the interpretation of the Will, tax returns if records are not readily available or the tax situation is complex, problems with valuing or realising an unusual asset, or agreeing on the disposal or division of assets in which several people have an interest. Where the administration of an Estate seem likely to be long drawn out, interim distributions to beneficiaries are often possible.
1. Action to be taken immediately following Death
This is a very difficult time and it may suddenly seem that there are innumerable matters requiring urgent attention. Registering the death and notifying the solicitor holding the Will are priorities. The Will may contain special directions regarding the funeral and burial or cremation. At this stage, however, the undertaker is the person on whom you will probably rely most heavily, and he can, if you wish, organise nearly everything for you from the funeral itself right down to the smallest detail such as flowers. He is there to help and often it is easier to employ him to complete all the necessary tasks such as filling in the various forms relating to either cremation or burial, and putting notices in newspapers, if required.
You should contact us, as your solicitors, as soon as you wish to do so as the sooner you instruct us the sooner we can start the administration process.
2. Preliminary Meeting and Fact Finding Exercise
The meeting with your solicitor will basically be a fact finding exercise to determine whether or not there is a valid Will, what its terms are and what the Estate of the deceased consists of. As many relevant documents as possible should be brought into the office such as the Will itself, if we do not already hold it, the Death Certificate and copies, the deeds of any property owned by the deceased (or mortgage account number if the property is mortgaged), the funeral account and details of any debts, any share certificates, life policies, building society passbooks, recent bank statements, pension documents and DSS books if applicable.
We will then obtain up to date valuations of all the assets to enable us to prepare any necessary Inland Revenue account and other papers which have to be lodged when we apply for a Grant of Probate or Letters of Administration.
In cases where a partner of Cooke Painter Ltd. Solicitors is an Executor, and in other appropriate cases, we will place advertisements for creditors or other claimants on the Estate which require any claim to be made within two months.
Very occasionally where the Estate is comparatively small and all the assets are in the joint names of the person who has died and a survivor (usually the spouse), all the assets will pass automatically to the survivor and there will be no need to apply for a Grant. If this is the case, we will so advise you at this stage.
3. Application for Grant of Probate / Letters of Administration
Where there is a valid Will, the Executors named in the Will then have to apply for a Grant of Probate which gives them authority to deal with the assets in the Estate. If there is no valid Will, the assets in the Estate will pass under the Intestacy Rules, which lay down the order in which the surviving relatives of the deceased have a claim on the Estate. It will usually be the surviving spouse or the children of the deceased who apply for Letters of Administration. Again, this will give them the necessary authority to deal with the assets in the Estate. For simplicity we will refer to a Grant of Probate or Letters of Administration as a Grant.
The assets in the Estate will be frozen on death, and so it may be necessary for purely practical reasons to obtain a Grant quickly to unfreeze the assets. In most cases, we can obtain a Grant within two months of being instructed. In an emergency (for instance if a property sale is already going through), an application for a Grant can be made based on estimated figures.
Inheritance Tax, if payable, must be paid on all assets when applying for a Grant. Estates worth over £325,000.00 pay Inheritance Tax at 40 per cent on the excess, subject to various reliefs and exemptions. The chief one is the surviving spouse exemption whereby property passing between husband and wife is free of inheritance tax (subject to both spouses being domiciled in the UK for tax reasons). When calculating the size of the Estate, it must be remembered that any substantial gifts made by the deceased within seven years of death have to be taken into account. At this stage the assets in the Estate are not available to pay the tax so we can arrange for the tax to be paid from frozen assets or arrange a short term loan if necessary.
4. Gathering in the Assets and Completion of Tax Return
Depending on the terms of the Will (if there is one), the nature of the Estate and the wishes of the beneficiaries, some or all of the assets in the Estate will be realised by the Executors and converted into cash ready for distribution and this can be done as soon as a Grant has been obtained. Meanwhile, we will where appropriate arrange for a tax return to be completed up to the date of death. This involves an accountant working out the income received and/or capital gains made during the period since a tax return was last submitted including any allowances for which the deceased was eligible and then agreeing the figures with the Revenue. Unless the deceased employed an accountant, we use our own in-house accountant who will deal with this as expeditiously as possible.
The time it takes to gather in the assets and prepare and agree the tax return can vary enormously, depending very much on the complexity of the Estate, and on the nature of the assets.
No assets can be distributed until a Grant has been obtained, and the distribution of the Estate cannot be completed until the tax return has been accepted and agreed by the Inland Revenue.
5. Preparation of Final Accounts
Once steps 3 and 4 have been completed, interim accounts (if required) and the final accounts can be prepared and these will contain the following information:
- All the assets in the estate
- Any items which have been sold or purchased during the administration period
- Any expenses which have been incurred including Probate fees, inheritance tax, payment of debts and funeral expenses, legal and accountancy fees
- Any cash gifts which are to be made under the Will or any gifts of specific items
Final accounts will be forwarded to the Executors and residuary beneficiaries (those people who are entitled to a share in the residue of the Estate, rather than to a specific legacy) for approval prior to final distribution taking place.
6. Distribution to Residuary Beneficiaries
Once the final accounts have been approved then the last distribution of the assets in the Estate can take place. Depending on the nature of the assets, this may involve some more paperwork in the form of share transfer forms or, in the case of a house, the appropriate Land Registry forms and dealing with a Land Registry application unless this has already been carried out before that stage.
One further point: Deeds of Family Arrangement
These effectively alter the terms of the Will or Intestacy and can only be made with the consent of all those concerned. A Deed of Family Arrangement can be made for a variety of reasons, the most common of which are:
- To minimise inheritance tax on the Estate by making better use of reliefs and exemptions.
- To pass assets direct to the next generation and thus reduce inheritance tax liability in the future. For example, an elderly beneficiary may prefer his share in the Estate to be given direct to his children, so that it does not form part of his Estate and so suffer inheritance tax on his death.
- Under current legislation, a Deed of Family Arrangement will be effective for inheritance tax purposes as long as it is made within two years of the death. If such a deed might be appropriate, this often emerges at the first interview, but it can be dealt with at any time during the administration period.
- We believe the information contained herein to be correct as at the 20th September 2008. Whilst all possible care is taken in the compilation and presentation of this fact sheet, no responsibility for loss, occasioned by any person acting or refraining from acting as a result of the material in the fact sheet, can be accepted by the firm or the author.