What to do when the worst happens

Coming to terms with the loss of a loved one and coping with the various stages of grief is one of life’s biggest challenges. Having to then deal with the estate of that loved one can seem like a daunting and complicated matter, but with recent changes to the way one deals with probate and the supply of information to HMRC, families and executors could be worrying unnecessarily.

This article briefly outlines the process of dealing with someone’s estate.

• Register the death – within 5 days for a certificate for a burial. Contact your nearest register office and would normally be done by a relative.
• Arrange the funeral – check the Will (if there is one) for any specific instructions.
• Notify – there is a tell us once service offered by the government which will notify all the government agencies including HMRC, DVLA, Department for Work and Pensions, Passport office. You will also need to notify banks, landlords, utility companies, societies, clubs, financial advisors etc.
• Gather information on the estate, identifying assets, debts, and liabilities. Value assets and determine if there is Inheritance tax to pay. An executor will need a snapshot of the deceased’s estate on the date of death. There are different ways to value certain assets but generally it is the open market value on the date of death. Assets will include property, cash, chattels, investments, trust interests. The executor will need to also identify if assets are held jointly with others, as this will affect the valuation of assets. Debts and liabilities will include mortgages, outstanding loans, care home fees and amounts due to HMRC.
• Consider if the estate needs to be reported to HMRC. An inheritance return IHT400 and supplementary forms is required if inheritance tax is due. The return is also required in certain circumstances for example if the deceased gave away over £250,000 in the 7 years before they died, made gifts in the 7 years before death but continued to benefit (for example gave away a painting but continued to hang it on their own wall) or left an estate worth more than £3m.
• Apply for probate. The grant of probate gives the executors the authority to administer the estate in accordance with the Will (or Intestacy rules if there is no Will). Generally, executors will not be able to enter into any contracts without having received the grant of probate or register assets in their name or register assets into the name of beneficiaries. Not all estates require probate for example if the deceased only had a small amount of savings, held only joint property, or only held land as joint tenants. The probate application can be made online or by completing the form PA1P and send to HMCTS Probate office who will also require the original will and death certificate. The current court costs for probate are £273 plus £1.50 for each additional copy.
• Distribution of estate – once probate is received (which currently can take approx. 8 weeks) the executors will be able to administer the estate. This includes settling liabilities, selling assets, reporting income and gains of the estate to HMRC, making distributions to beneficiaries and advertising for any unknown creditors and beneficiaries to come forward.

This is a very brief overview of the process. There is often tax planning to be considered too before the completion of the IHT 400 and prior to the estate being distributed to ensure that maximum tax reliefs are utilised. Do contact us if you would like to talk though any estate or probate matter.