Probate and inheritance - how to deal with the financial affairs of someone who has died

Probate: the basics - what does probate actually mean?
How do you obtain probate?

18 November 2019

We hear the word 'probate' bandied around a lot but what does it actually mean?  

Probate is a general term which is normally used to describe the legal and financial processes involved in dealing with the property, money and possessions (ie the ‘estate’) of a person who has died. 

There are three variants:

Grant of Probate

This is where the deceased left a Will, which named executors (ie individuals who they wish to administer their estate).

Only the executor named in the deceased’s Will can apply for probate to administer their estate.

Our recent blog explains what your responsibilities are and also whether you need to act.

 

Letter of Administration (with will annexed)

This is where the deceased left a Will which either did not name executors or none of the executors are able to apply for probate. 

There are specific rules about who can apply for the letters of administration in this situation. This is generally the person who is the main beneficiary of the Will and they are known as ‘administrators’ but have to some extent the same responsibilities as executors.

 

Letters of Administration

This is where the deceased did not leave a Will. If someone dies without a Will, they are said to be intestate. The intestacy rules will say who can apply to administer the estate instead. There is a specific order of who can apply in such a situation; spouse, children, parents, siblings, aunts and uncles. Similar to above, the individual who takes out the letters of administration is known as the ‘administrator’.

 

How do I 'get' probate?
 

We have already blogged about what to do when someone dies in terms of the practical next steps to take, but what happens next?  The process of applying for probate is relatively straightforward. The steps are:

1. Information gathering

The first stage in the process will be an information gathering exercise to identify and value all of the deceased’s assets and to report it to HM Revenue & Customs (HMRC).

This will involve identifying the deceased’s assets and debts and estimating the gross value of the estate. The estimate is based on date of death valuations.

 

2. Complete the Inheritance Tax (IHT) account

There are two main IHT documents that need to be completed:

  1.  An IHT400. The IHT400 is a lengthy document (with schedules) which sets out the assets and liabilities. This will include things such as bank accounts, personal items, property held, and expenses such as funeral costs. The executors/administrators will need to sign the IHT400.

    In some circumstances, a shorter IHT form can be used which is an IHT205.

    If the deceased had their permanent home abroad, and their assets in the UK consisted of cash or quoted shares only, which was less than £150,000 (gross), form IHT207 can be used.
  1. An IHT421. This is a probate summary of the IHT400 and confirms to HMRC whether IHT is payable or not. HMRC will stamp the IHT421 and return it and either you or your solicitor should submit it to the Probate Registry.

 

3. Pay any IHT

IHT will need to be paid before the Grant/Letters of Administration will be issued and therefore before it has been possible to draw in all the assets of the estate.

There are various ways to pay the IHT due on an estate, including paying on account from your account, from the deceased’s account or paying in instalments. You should consider the best option depending on your circumstances and the assets.

It is important to ensure that IHT is paid no later than six months from the end of the month in which the deceased died. Interest will be charged on unpaid tax after that date.

 

4. Apply for the Grant/Letters of Administration

In order to apply for probate, the following documents need to be provided to the Probate Registry:

  • stamped IHT421 (which will confirm that the IHT has been paid);
  • the original Will (if there is one);
  • an official copy of the death certificate;
  • a statement made by the Executors/Administrators, which confirms that they agree to act and that the information provided in the application form is true to their best knowledge and belief; and
  • the Probate Registry office fee.

If the original Will cannot be located, an affidavit which sets out the circumstances in which the Will has been lost will need to be prepared and signed by the appropriate person.

 

5. Distribution of the Estate

Once the Grant/Letters of Administration has been made, you can collect the assets, pay any liabilities and then distribute the estate.

The assets should be distributed in accordance with the deceased’s Will. If there is no Will, the estate will be distributed in accordance with the intestacy rules.

 

Further information

For further information on the issues raised in this blog, please contact a member of our private client team.

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