Probate Archives - MLP Law

Probate Administration and Trust Administration – pros and cons

Clients often ask if they should transfer part of their estate into a trust in lifetime, to avoid the need for a grant of probate upon death. This can be a useful strategy for various reasons, but there are also administrative and accessibility issues to consider before doing so.

Currently, the wait time for a grant of probate is a minimum of 16 weeks from submission of the application to the Probate Registry and can be much longer if a paper application is required rather than an online submission. This can cause inconvenience and distress for families when assets cannot be accessed until probate has been granted – causing financial problems for a surviving spouse or either beneficiaries. Additionally, if a house in an estate is to be sold, the delay in receiving the grant of probate can cause the sale to become very protracted and even for a buyer to withdraw due to the delay.

If, however, a client has transferred assets into a trust during their lifetime, then a grant of probate is not required for those assets to be distributed to the named beneficiary(ies) and can therefore save a great deal of time and expense in having to apply for probate.

An individual can transfer assets up to the value of the nil rate band (currently £325,000) into a lifetime trust. If a transfer exceeds this sum, then a lifetime inheritance tax charge of 20% is levied upon the value of assets in excess of the nil rate band. This of course is 50% less than the death rate value of inheritance tax at 40% and so although is a tax levied in a lifetime, does reduce the death rate by half.

Once assets are transferred into the trust, they are transferred into the legal names of the trustees. The person who set up the trust (the settlor) can be a trustee but there are potential adverse tax implications if the settlor is also to be a beneficiary and advice should be taken on this point. The trust deed would name the potential beneficiaries – for example, the children and grandchildren of the settlor.  There are potential benefits in protecting assets from care home fees by transferring them into trust, but again, this is a wide topic and outside the scope of this introductory blog. Always seek professional advice when planning for care.

There are different types of trust explored in other blogs by mlplaw, such as discretionary trusts and life interest trusts. The broad position is that once assets have been transferred into a trust, and you are not longer ‘retaining a benefit’ from those assets then they are regarding as being ‘outside’ of your estate for inheritance tax purposes, and those assets will not require a grant of probate to be dealt with upon your death.

If you have transferred your home into a trust, then upon death a grant of probate would not be required to sell the property, however, the value of the property may still be regarded by HMRC for inheritance tax purposes as being in your estate, as you have continued to live in the property therefore ‘retained a benefit’ from this. There are ways to avoid this trap however which advice should be taken on.

A further consideration with transferring assets into trust is that you may no longer be able to have use or easy access to them, so if you are likely to require access to those assets in future, by transferring them into trust, you ‘lose control’ of disposal of those assets as they are then legally owned by the trustees.

Therefore, although there are advantages of transferring assets into trust, for tax planning and possible care home fee protection reasons and to avoid the need to obtain probate, there are serious considerations to be taken into account and professional advice should always be sought.

Here at mlplaw we are experts on trust and probate matters and advise extensively upon estate planning to ensure the best outcome for tax effectiveness, and care home fees planning whilst ensuring that a client has access to all the assets they need for a long and comfortable retirement. Please call Doris Raggatt, Legal Director on 0161 926 1538 or dorisr@mlplaw.co.uk for a 30-minute free advice appointment.

Executor’s Duties: What to Expect During the Probate Process

The passing of a loved one is undoubtedly a challenging time, and for those entrusted with the role of an executor, the responsibilities can be overwhelming. Understanding the duties of an executor during this process is essential for a smooth and efficient administration of the estate.

Locating Assets and Liabilities

The first duty of an executor is to compile a comprehensive list of the deceased’s assets and liabilities. This includes properties, bank accounts, investments, debts, and any other relevant financial information. All companies whom the deceased had an asset or liability with should be notified of the death. Some financial providers may allow the executors to close the deceased person’s account at this stage in the process, however, some assets (including selling a property) will require a Grant of Probate.

Notifying Beneficiaries

Executors have a duty to inform beneficiaries named in the Will about their entitlements. Managing these communications promptly helps prevent disputes and ensures a transparent probate process.

Applying for Probate

Once the assets and liabilities are identified, the executor can then apply for a Grant of Probate from the Probate Registry. A Grant of Probate provides the executor with the authority to manage and distribute the deceased’s estate. The application involves submitting the Will, along with relevant documents, and paying the necessary fees.

If Inheritance Tax (IHT) needs to be paid, the executor will also need to prepare IHT forms to be submitted to HMRC and arrange to pay any tax owed prior to applying for the Grant of Probate.

Dealing with Assets and Liabilities

For assets that require a Grant of Probate to be dealt with, these can now be sold or cashed in. Once the estate has sufficient funds, prior to making any payments to beneficiaries, any outstanding liabilities need to be paid.

Distributing the Estate

Once debts and taxes are settled, the executor can proceed with distributing the remaining assets to the beneficiaries according to the terms outlined in the Will. It’s crucial to adhere strictly to the deceased’s wishes and to keep meticulous records of all transactions during the entire probate process.

Finalizing the Estate

After distributing the estate, the executor is tasked with finalising the probate process. This involves preparing a detailed account of the estate administration, including financial transactions and distributions.

Understanding Probate costs and how to reduce them

Dealing with the probate process can feel overwhelming, especially when managing financial matters and expenses. There are various costs associated with obtaining probate and handling estate administration, and this article explores these costs and strategies to lessen their impact.

What costs are usually involved?

  1. Application fee:

In obtaining a grant of representation (probate) there is an application fee, which is payable to HM Courts and Tribunal services, upon application.  The grant gives you the legal authority to administer a deceased’s estate.

At present, there is an application fee if the estate is valued over £5,000. The application fee is currently £273. There is no fee for estates worth £5,000 or less.

 

  1. Inheritance tax:

When dealing with an estate, it is important to ascertain whether it will be subject to inheritance tax. This will depend on the value of the deceased’s estate and who the estate is being left to.

There are different reliefs and exemptions available for estates. The rate of tax on death is 40% and becomes chargeable on assets over the available nil rate band (currently £325,000).

Seeking professional help can determine the tax liability and any potential reliefs or exemptions that may be applicable.

 

  1. Professional valuations:

An important part of the estate administration is valuing the deceased’s assets and liabilities. It is important to obtain accurate information as the value of the estate may impact probate fees and inheritance tax calculations.

As such, it may be necessary to instruct professionals to carry out valuations to ensure that the process is accurate and compliant. This could include property valuations from estate agents or surveyors, valuations of business assets and personal belongings.

 

  1. Disbursements:

There are several expenses which are associated with probate and estate administration, including bankruptcy searches, bank transfer fees, legal statutory notices, trust registration, identification searches and much more.

These expenses are often associated with an estate and are required to ensure that the personal representative has completed their responsibilities as best as possible. Failure to comply with certain requirements and procedures, could result in personal liability for an executor or personal representative.

 

  1. Solicitor fees:

If you instruct a solicitor or legal representative to assist you on behalf of the estate, they will charge a fee for their services. Their costs will vary depending on the complexities of the estate.

 

Mitigating costs and probate

Even though a grant is required in some circumstances, irrespective of whether the deceased left a will, there are numerous options available to you to help your beneficiaries and reduce costs.

 

  1. Prepare a Will

A will is a vital part of planning for probate and your estate. With proper advice and guidance, you can review the likely costs involved in your estate and plan for these accordingly.

Providing your executors with clear instructions ensures that there are no uncertainties following your death and prevent hidden costs from arising. As part of your Will review, your solicitor will be able to provide advice and guidance on how best to prepare and mitigate costs including inheritance tax planning.

 

  1. Inheritance tax planning

As mentioned, seeking professional advice on estate planning can significantly reduce the tax liability on death. Much of estate planning involves lifetime transfers and utilising exemptions and reliefs available to benefit from lower tax liabilities. When considering ways to reduce the value of your estate, you could consider:

  • Gifts from the estate
  • Gifting assets into a lifetime settlement/trust
  • Tax friendly investments
  • Life policies

 

How can mlplaw help?

To assist with a transparent probate process and gain an understanding of the costs involved, it is important to seek professional assistance. At mlplaw our specialists can advise you on the process and provide clear and concise advice for you and your family.

By offering estate planning suggestions and discussing the costs with you, you will be able to reduce the difficulties faced by your loved ones, following your death.

Our specialists offer a full range of estate administration services, guiding you through the process and ensuring that your wishes are carried out.

What to expect when administering an estate

Losing a loved one is never easy, and when it comes to dealing with the legal and financial matters surrounding their estate, the process can seem overwhelming. The legal process of settling an estate is commonly known as probate. This article will unravel the probate process, guiding you through what to expect when dealing with the affairs of the deceased.

What Is Probate?

Probate is the legal process of administering a deceased person’s estate. It involves several steps to ensure that their assets are distributed correctly, and any outstanding debts are settled. The process varies depending on the complexity of the estate but generally involves the following key steps:

  1. Locate a Will: The first step in the probate process is to establish whether the deceased left a valid will. If the will has been validly executed, it will be used to determine how the estate should be distributed.

 

  1. Gathering Information: The executor must gather information about the deceased’s assets, debts, and any other relevant financial matters. This may include bank accounts, investments, property, and outstanding loans.

 

  1. Valuing the Estate: All assets within the estate must be valued. This includes obtaining fair market value of property, investments, and personal belongings. The executor must also account for any outstanding debts and funeral expenses.

 

  1. Paying Inheritance Tax: If inheritance tax is due, it must be paid before distributing assets to beneficiaries. Some estates are exempt from this tax, and there may be reliefs or exemptions available in certain cases.

 

  1. Applying for Grant of Probate: To gain legal authority to administer the estate, the executor must apply for a Grant of Probate if there’s a will or a Grant of Letters of Administration if there’s no will. These documents are issued by the Probate Registry and confirm the executor’s authority to act on behalf of the deceased.

 

  1. Settling Debts and Expenses: Before distributing assets, the executor must settle any outstanding debts, including income tax and other liabilities.

 

  1. Notifying Beneficiaries: After all debts are paid and taxes are settled, the remaining assets can be distributed to the beneficiaries as outlined in the will or the rules of intestacy.

 

  1. Closing the Estate: The final step is to wrap up the estate administration. This includes preparing a detailed account of the financial transactions and obtaining clearance from the beneficiaries that they are satisfied with the distribution.

 

Seeking Legal Advice

Given the complexities of the probate process and the potential for disputes, it’s advisable to seek professional legal advice. Our specialist team are experienced in dealing with a full range of estate administration, guiding you through the process, ensuring that the deceased’s wishes are carried out accurately and that all legal requirements are met.

Probate Myths vs. Reality: Debunking Common Misconceptions

Probate is often misunderstood, leading to misconceptions that can cause unnecessary stress and confusion.

Myth 1: Probate is always required.

Probate is the legal process of proving a Will and administering the estate of a deceased person. To prove they have authority; the executors will need to apply to the Probate Registry for:

  • Grant of Probate if the deceased person made a Will; or
  • Letters of Administration if the deceased person did not make a Will.

However, this is not always necessary. Assets that are owned jointly, including properties, or cash under the value of £50,000.00 (this varies from bank to bank), will not require probate. Financial providers for which the deceased person had accounts with should confirm whether they will require a Grant of Probate/Letters of Administration to close the account.

 

Myth 2: It’s a speedy process.

 

We wish! In reality, probate can take several months, or even longer, to complete. This timeline largely depends on the complexity of the estate, potential disputes among beneficiaries, and the efficiency of the executor. Executors must gather assets, pay debts, and distribute the estate according to the Will or intestacy laws. Delays can occur if there are disputes, complications, or delays with the Probate Registry.

 

Myth 3: Probate is expensive.

This depends entirely on the deceased person’s estate and the work involved. Probate fees depend on the value of the estate and the overall complexity, which depends on the number of assets/liabilities in the estate and any disputes.

Our legal advisors will review the estate with you and then provide you with an outline of the costs.

It is also important to note that any legal fees incurred during the probate process are payable by the estate and not by you personally.

 

Myth 4: A Will avoids probate.

 

The purpose of a Will is to set out your wishes for what happens to your assets after you die. If a person dies intestate (without making a Will) the process can be more time consuming and costly for their executors. A properly executed will can make the probate process smoother, but it doesn’t eliminate it.

 

 

Myth 5: Executors cannot be held personally liable.

Executors can be personally liable if they mishandle the estate. Executors have a fiduciary duty to act in the best interest of the estate and its beneficiaries. If they fail to perform their duties correctly, they can be held personally responsible for any financial losses incurred by the estate. This is a critical responsibility that requires careful attention to detail and compliance with the law, and why having the professional support of an experienced probate lawyer is so important.

 

Myth 6: Probate is always a source of family disputes.

While family disputes can arise during probate, they are not inevitable. Open communication and proper estate planning can help minimise the potential for conflicts among beneficiaries. In many cases, clear instructions and a professionally prepared Will can reduce the likelihood of disputes. It is essential to keep lines of communication open to address any concerns that may arise during the probate process.

 

 

Myth 7: DIY probate is always the best option.

 

While some individuals choose to handle probate without legal assistance, it’s not always the best choice. Probate can be a complex and legally intricate process, and one mistake can lead to costly delays and complications. Hiring a lawyer experienced in probate matters can ensure that the process is handled correctly and efficiently.

What happens when a Business Owner suddenly dies

When an individual dies, everything they owned at the date of death forms part of their estate. This includes property, cash, investments and business assets. Each type of business is handled differently and there are many things to consider, such as what will happen to the business and in some cases whether the business can continue to operate.

What happens to my business assets?

When a business owner dies, their interest in the business forms part of their estate and will be distributed in accordance with their Will or the rules of Intestacy.  What happens to the business depends on the structure of the business i.e. limited company, sole trader, partnership.

Sole Trader

In the event of the death of a sole trader, the Personal Representatives, as part of Probate and the administration of the estate, are required to take over the business. Their options include selling it as going concern, continuing the business and holding it on trust for the deceased’s beneficiaries if underage, or closing the business down and disposing of the assets.

Under this structure, there is no distinction between the business finances and the personal finances. This means any debts the business had are considered to be personal debts of the Estate. A Will ensures that appropriate executors are appointed and can act immediately to avoid any delay in continuing to run the business.

Limited Company

A limited company is a separate legal entity owned by shareholders, meaning the business and the shareholder’s personal assets are separate.

The deceased’s personal representatives will be responsible for dealing with their shares in accordance with their Will or intestacy. Depending on the circumstances and any separate agreement, the shares can then be sold or transferred to the beneficiaries of the deceased.

The limited company will have rights and restrictions attached to the shares set out in the Articles of Association and any Shareholder Agreement between the shareholders. Either of these documents may contain provisions determining what is to happen in relation to shares owned by a shareholder wo dies.

Partnerships

In the absence of a partnership agreement, if a partner dies, the partnership is dissolved, the assets are realised, the debts are paid and the surplus (if any) is distributed to the surviving partners and the personal representatives of the deceased partner in line with their entitlement. This can be problematic if, on death, the surviving partners want to continue the business.

 

How can MLP Law help?

Inadequate planning for the death of business owner may lead to complications with the business following the sudden death of an owner. Our experienced team can provide you with advice and assistance in administering estates that contain business assets. We can take full responsibility for dealing with the business and provide specialist support and advice. Our experts can provide you with clear succession planning to allow you to control the destination of the business assets and shares, including bespoke Business Trusts.

Our team can advise you on:

  • What happens on death
  • Preparation of Business Wills
  • Bespoke business trusts
  • Cross Option Agreements
  • Review of the companies’ articles
  • Transferring the ownership of the business
  • Winding up a business
  • Sale of a business

A guide to Estate Administration

When a loved one dies it can be a very difficult time for family and friends. Our guide is designed to provide you with the initial steps to be taken and an explanation of the roles and responsibilities of a personal representative.

  1. Register the death and notify the government of the death.

Once you have obtained the medical death certificate, you will need to formally register the death with the registrar.

When the death is registered you will receive a unique reference number to access the Tell Us Once service. This service allows you to inform all the relevant government departments when somebody dies.

 

  1. Organise the funeral.

The funeral should be organised by the Personal Representatives of the deceased. Funeral costs are an expense of the estate and can be paid from the deceased’s bank account before a Grant of representation has been obtained.

 

  1. Find out if there is a Will.

A Will is a legal document that sets out an individual’s wishes and expressions regarding the distribution of their property and estate when they pass away.

If they left a will, there will be executors appointed to distribute the estate in accordance with the terms of the Will.  The Will should specify how they want their assets to be distributed.

If you cannot find a will in their home, you can contact their solicitor, accountant, or bank to see if they hold a copy. There is also a national will register which you can pay for a search of registered documents.

If there is no Will, the personal representatives will require a Grant of Letters of Administration to distribute the estate in accordance with the intestacy rules.

 

  1. Is a Grant of Representation required?

A grant of representation is a legal document that gives the personal representatives authority to administer the estate. A grant or representation is commonly known as ‘Probate’ or ‘Letters of administration’.

In some estates, it may not be necessary to obtain a Grant of Representation, commonly on the death of a spouse and all the assets are due to pass to the surviving spouse.

Where there are joint assets such as jointly held bank accounts and property held jointly, these will normally pass by survivorship to the surviving joint owner and a grant of probate is not usually required.

When someone dies leaving assets in their sole name, even if the person had a Will, without a court-sealed grant of representation any property or money held cannot be accessed.

 

  1. Valuation of the estate assets

To ascertain whether there will be an inheritance tax liability, you will first need to understand what assets are included in the estate and their values.

You will need to obtain date of death balances for funds held in accounts and with financial institutions, information on stocks and shares held, valuation of any property, life insurance and pensions, business assets and any investments.

Once you have an estimate of the estate’s value, you will be able to find out if Inheritance Tax is payable.

The estate will not have to pay inheritance tax as long as one of the following applies:

  • It all passes to the spouse or civil partner of the person who died.
  • It all passes to a charity or a comminute amateur sports club.
  • It has a value below the inheritance tax threshold of £325,000. If the person who died was widowed or is giving away their home to their children, the tax threshold can be higher.

 

  1. Inheritance tax

If Inheritance tax is due, you must complete and report to HM Revenue and Customs (HMRC) by completing the relevant tax forms. You must submit the form within 12 months of the person dying. If you miss the deadline, you may have to pay a penalty.

You must pay the inheritance tax due within 6 months from the date of death. There is an option to pay the tax due on some items in yearly installments, e.g. a house.

Once you have completed and sent the forms to HMRC you will need to wait 20 working days before you can apply for a grant of representation.

 

  1. Apply for a Grant of Representation

You can apply for a grant yourself online or by post. You can also appoint a representative such as a solicitor to apply for a grant on your behalf.

The personal representative will need to sign a Legal Statement confirming that they are the correct person and the person applying for a grant.

You may need to pay a fee to apply for a grant. The fee is dependent on the value of the estate.

  • If the estate is £5,000 or less there is no fee
  • If the estate value is over £5,000, the application fee is £273

 

  1. Estate administration and distribution

Once the Grant of representation has been issued, the personal representatives can use the grant to close accounts, sell or transfer shares and investments, and sell or transfer property.

During the administration, the personal representative will need to deal with the following:

  • Settle outstanding debts and taxes. Personal representatives can also place a notice in the gazette giving unknown creditors 2 months to claim anything they are owed. This provides the personal representative with security that they will not be personally liable for unknown creditors if they wait to distribute the assets for 2 months.
  • The personal representative may need to sell shares, investments or property of the estate. They will need to consider the tax consequences, as the estate may have to pay Capital Gains Tax on them if the value has gone up in value since the person died.
  • Report to HMRC on any income received during the administration period.
  • Distribute the estate to the beneficiaries. Once the debts and taxes have been paid, the estate can be distributed in accordance with the terms of the Will or intestacy. The executor should prepare final estate accounts to show the assets and liabilities of the estate and how they were distributed.