We answer some of your probate questions
Since Can't Take It With You first aired two week's ago, we have received a number of questions about aspects of wills and the administration of people's estates which have been mentioned but not covered in detail in the show.
One of the most popular topics which many viewers seem to be interested in, is what happens with a will and to an individual's estate after someone dies. The probate process can be a difficult one and, whilst it is possible to complete it without legal assistance, the majority of people find that expert advice is invaluable. Dora Clarke, a partner in the EST team at Withers, answers some of the frequently asked questions which viewers have raised below.
1. What is probate?
Probate is the process whereby a deceased individual's estate is administered and then distributed according to the terms of the will. In order to properly administer an estate, it is necessary for the executors to apply for a grant of probate (from the Probate Registry). Although executors derive their authority from the will itself, the grant of probate confirms their entitlement to deal with the assets. In practice, however, most asset-holders will require the executors to produce a grant in their favour before acting on their instructions. Asset-holders that hand out assets to an executor acting under a current grant are protected from claims from creditors of the estate, beneficiaries or executors of a later will if one comes to light at a later stage and a replacement grant is issued. They are at risk if they hand out assets to anyone else and in practice are unlikely to do so.
If there is no will, then it will be necessary for the deceased individual's close family (and there is a specified order as to who should apply) to apply for a grant of letters of administration, which allows the administrators to act in a similar manner to executors.
2. A loved one has appointed me as their executor; what will it involve?
Administering an estate involves a series of stages, which may start with the registration of death and ends with the distribution of assets. The executors are responsible for collecting in the deceased's assets, paying his debts, settling any tax and distributing his estate. To fulfil these duties they have powers under statute and common law, which may be modified or extended by the will.
One of the most important tasks you will need to do is to identify and collect in all of your loved one's assets and identify all of their liabilities, so that these can be distributed according to the will. It is important that this exercise is carried out thoroughly to reduce the risk of something unexpected cropping up years after the administration has been completed. You may well need to obtain valuations of certain assets.
Once the assets have been identified, you will need to complete the Inheritance Tax returns and submit these to the Revenue (it is important that these are completed accurately as there are high personal penalties for inaccurate returns). You will then need to pay any Inheritance Tax due (though there are instalment options available on certain property). Once this has been paid, you will be able to apply for a grant of probate which will then enable you to deal with the assets and distribute them according to the will. Sometimes, you may have to trace the beneficiaries.
The role of executor can be a demanding and time consuming one and, in nearly all cases, you will need to involve a solicitor or other professional to some extent to assist you with the administration of the estate. No-one should agree to take up the post of executor unless he has carefully considered the nature of the role; executors' duties are onerous and while their powers may be wide, they must be exercised with care. If an executor has any doubt about the scope of the role or about his responsibilities he should take legal advice as soon as possible.
If someone is appointed as an executor by a will but, on the testator's death, does not want to take on the role, then they do not have to apply for probate and, provided they do nothing which indicates that they are acting as executor, they will not assume the authority of an executor.
3. My wife has died and all our assets were in joint names, including our house. She left a will leaving everything to me. Do I need to apply for a grant of probate?
Provided all the assets are jointly owned as joint tenants (as compared to tenants in common - see below) then all the assets will pass automatically to you by survivorship outside the terms of your wife's will and you will not need a grant of probate to obtain release of the assets.
However, it is essential that you check how your house is owned. Commonly between husband and wife the house will be held as a joint tenancy and therefore passes to the survivor simply by survivorship as mentioned above. However, it could be that the house was owned in your joint names as tenants in common. If this is the case then you and your wife will be deemed to own a percentage share of the property each (commonly 50%) and I am afraid that you will need to apply for a grant of probate in order to deal with your wife's half share. Even though under the terms of her will it passes to you in any event you will not be able to change the legal title on the title deeds into your sole name without the grant of probate.
4. My late father didn't make a will; who will inherit his estate?
As your father did not make a will, he will have died intestate and so his estate will be distributed according to the intestacy rules (which are set out by statute). If your father was married at the date of his death, then his wife will take his personal chattels and the first £250,000 of his estate. (We are assuming that he died recently - the amount a surviving spouse is entitled to receive changed recently). The balance will be divided into two equal shares. One share will pass to you and your father's other children equally at 18. The other share will be held on life interest trusts for his wife (so that she will receive the income generated from this share but not the capital of the share). On his wife's death, this share will pass to you and your father's other children equally.
If your father was not survived by a wife, then all of his estate will pass to you and your father's other children equally.
If your father had any property which he owned as a joint tenant (as opposed to as tenants in common) with someone else (say, his house) then his share of this jointly owned property will pass automatically to the other joint owner by a process called survivorship.
5. My live-in partner hasn't made a will; if he died would I still be entitled to any of his estate?
Unfortunately, the intestacy rules do not make any provision for live-in partners and so, if your partner were to die without having made a will, you would not receive anything which formed part of his estate.
If you own your house as joint tenants (rather than as tenants in common) then the house will automatically pass to you by survivorship (as indeed will any jointly held bank accounts) but everything in your partner's own name will pass under the intestacy rules.(which are set out in statute). Broadly speaking if your partner had children his estate will pass to them and, if not, it will pass to his parents.
If he dies without making a will you will be within the class of persons who are entitled to bring a claim under the Inheritance (Provision for Family and Dependants) Act 1975. In summary you will ask the court to agree that the intestacy rules do not make reasonable provision for you and ask them to exercise their discretion to order that part of the estate is transferred to you. This claim may be defended by those persons entitled on intestacy and if you have children they will in any event have to be represented to protect their inheritance. You will need to instruct a solicitor and will incur legal fees and the process is not particularly quick which may leave you in difficult financial circumstances immediately following the death and at a time when you are coping with the loss of a loved one. The court will ultimately balance the competing needs of you and those who are entitled under intestacy and this may have the unfortunate result, if for instance you do not own your house as join tenants, in you having to sell the house to pay out the inheritance of those entitled on intestacy.
A claim under the Inheritance (Provision for Family and Dependants) Act 19756 is really a last resort and one you and your partner should not rely on to protect you in the event of his death. I would urge you to get a will drawn up as soon as possible.
6. My father died suddenly and unexpectedly and was in the process of selling his house. Contracts had been exchanged but completion is not due for another four weeks. I am told that we are unlikely to get the grant of probate within this timescale and without that we cannot complete the sale and will incur large penalties and interest charges. Is there anything that we can do to prevent this?
In the circumstances you would probably be able to apply to the Probate Registry for a grant ad colligenda bona. This will be limited purely so as to be able to complete the sale of the property and is not a substitute for a full grant of probate. You would have to go back to apply for the full grant at a later stage but it would allow you to complete the sale of the house without incurring penalty and interest charges. The other good thing about an application for a grant ad colligenda bona is that you will be able to get dispensation from the Revenue without having to pay inheritance tax up front when you apply for the grant (I do not know if inheritance tax is an issue here). You will not be able to distribute the sale proceeds without obtaining the full grant of probate but it will mean that you will be able to complete the sale.
7. My husband died leaving his estate all to me with a legacy to our two children of £100,000 each. The Revenue are insisting that inheritance tax is due on these legacies which baffles me as they seem to be well within the tax-free limit of £325,000. My husband did give our son £200,000 in 2009 to buy a flat and I am wondering if this has got something to do with the tax.
Gifts made within seven years before someone died will be taken into account to calculate the inheritance tax, if any, payable on a person's death. Whilst obviously the residue of the estate will have the benefit of spouse exemption and there will be no tax to pay, from the facts you have given the £200,000 gift to your son will be added to the gifts of £100,000 each to your children given under the will, making a total of £400,000. Giving credit for the inheritance tax nil rat band of £325,000 this will leave a balance of £75,000 which will be subject to inheritance tax at 40%.
You do not say whether the gifts under the will are made ‘free of tax' or ‘subject to tax'. If the latter then the tax payable will be 40% of the £75,000 and will reduce the legacies paid to your children. If, however, the gifts are free of tax (or if the will is silent on this point) then I am afraid the Revenue will apply a calculation called grossing up. The reason for this is that your children would be taking their legacies of £100,000 each plus a gift of the inheritance tax payable on those legacies (which is payable out of the residue of the estate passing to you). The simple grossing-up calculation is 5/3 and applying this to the £75,000 subject to inheritance tax will make the gross gift to your children subject to inheritance tax of £125,000, ie resulting in an overall tax bill of £50,000 (as compared to an inheritance tax bill of £30,000 if the legacies are stated to be free of tax).
I should also mention that the lifetime gift to your son will be deemed to have taken place first and therefore will use up the first part of the inheritance tax nil rate band of £325,000.
8. What can be done if an executor doesn't carry out the Will's instructions?
The role of executor is an onerous and difficult task. Sometimes people embark on the role with all good faith and simply become bogged down in trying to complete the Inheritance Tax forms and collect in the assets and pay out the liabilities. If this is the case then they may be very happy to step down from the role. If a grant has been taken out then an executor cannot simply retire. As an executor you have legal title to all the deceased's estate assets and in order for the administration to proceed, the executor will need to be formally removed by the court in favour of a replacement executor - you will need specialist legal advice in relation to this.
Ultimately the court has the overall supervision of the administration of estates. If the executor fails to carry out the will instructions then you can ask the court to order that he sets out the reasons why in a sworn affidavit and he can be compelled to attend court and given evidence on oath of his conduct in the administration The court can also order that he is removed as executor and replaced with an alternative executor.
If the grant of probate has not yet been taken out then the individual concerned (provided he has not assumed the authority of an executor prior to this point) does not have to apply for probate at that time and could simply renounce his executorship or the other executors could apply for the grant without him, though reserving the right to be added at a later date.
