Understanding probate and the best way to deal with it

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Following the death of a loved one, advice from probate lawyer Philippa Barton is to make sure you understand the process of settling their affairs to make the situation as painless as possible.

To administer the assets of someone who has died, once a valid will has been established and a death certificate obtained, the person running the deceased’s affairs will first need to apply for a grant of probate to be able to distribute any money held in an account, to sell shares or bigger items such as a house.

“Most probate practitioners have come across clients who report the death of a relative, come to the office to collect the will and tell us that they will deal with the probate themselves. It is not uncommon for the same client to return a few months later looking harassed, carrying boxes of papers and correspondence, and very keen to hand the whole lot over and get someone else to do it for them,” Philippa says.

Applying for grant of probate

To apply for a grant of probate, you must obtain a date of death valuation of all assets held by the deceased and complete a very detailed tax form for the purposes of Inheritance tax (IHT). 

“Understandably, many people assume that this will be a straightforward form-filling process, particularly since the Government’s probate service has now set up a trial online application process for certain probate cases,” Philippa says.

In reality, the forms require a good knowledge of inheritance tax legislation, which becomes more complicated year by year, partly as a result of the need to close down schemes to avoid IHT and partly as a result of government changes to the nil rate band.

You must declare all gifts made in the last seven years, although gifts made from surplus income are disregarded and there are annual exemptions. If taper relief applies, then a lower rate of tax is chargeable.

This is a minefield. You have a duty to the Revenue to declare the relevant information and you have a duty to the beneficiaries to apply for reductions and reliefs where you can.

The client may not be aware that it is possible to apply for funds from the deceased’s bank account to pay for the funeral expenses and for the Inheritance Tax (IHT) which must be paid before you apply for the grant of probate.

You may not realise that not all the appointed executors need to apply for the grant of probate. They can agree that one person will deal with the estate with power reserved to the remaining executors. This will work much more smoothly in practice as the documents need only be signed by one person.

Also, if the executor sells shares within 12 months of the date of death and makes a loss, they can claim refund of IHT. Similarly, if an executor sells a property within four years of the date of death for less than the date of death value, they can claim a refund of IHT.

Executors must also collect tax deduction certificates and may have to file an income tax return for the administrative period.

“In reality, if you apply for a grant of probate in person, the court fee is higher as the court draft the legal documents for you. The process is also slower.

“My advice is that dealing with the estate without a solicitor may well be a false economy, not only in respect of the time and effort involved, but also in terms of progressing quickly and ensuring that the correct amount of tax is paid.”

Philippa Barton is a private client partner at Hodge Jones & Allen

Tags: estate planning grant of probate

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