Probate Guidelines for Executors and Estate Administrators
We have set out some guidelines for Executors and Estate Administrators. It is always advisable to seek advice from reputable sources – Government guidelines on probate and inheritance tax are a good starting place; you can do this by:
- Looking online at www.direct.gov.uk
- Visiting your local Probate Office
- Calling the Probate and Inheritance Tax Helpline, on 0845 302 0900
- Download and Read the Government Guidelines on How to Obtain Probate
If you are seeking professional advice it is a good idea to go to regulated professionals – STEP (the Society of Trust and Estate Practitioners) can provide further information on the professional management of Probate but remember that a professional executor will charge a fee – ask for a quotation rather than an estimate of costs (as a general guide charges normally stand at around 1.5%-2% of the total estate value) – you may need to consult with beneficiaries as these fees are normally taken from the estate.
In 2016 the government has announced a proposal to overhaul probate charges moving away from the flat rate of £215 on all estates valued at more than £5000 to a tiered system which will be based on the overall value of an estate – Learn more
If you are already in the process of managing an estate you may find it useful to layout basic financial details in a spreadsheet we provide a sample example in our Document Library which you can download and amend.
- Know what you’re getting yourself into –
Being an executor is a serious legal responsibility, so if a friend or family member asks you to take on this role take the time to find out exactly what it involves. There is help available and the online government guidelines are a good place to start – or if you know a friendly solicitor you can ask their advice. It normally takes between six months and a year to administer an estate so it requires quite a time commitment.
- Understand what your main tasks are –
The primary functions of the executor are to value the estate’s assets and debts, pay Inheritance Tax (if applicable) and creditors, and then distribute the remaining assets to beneficiaries. It is essential to keep accurate, transparent records of everything you do as an executor; this is especially important if Inheritance Tax is payable (currently at 40% on estates over £325,000 (2012 -2013)). While most estates are relatively straightforward there is always the potential for disputes with beneficiaries and creditors including Her Majesty’s Revenue and Customs, so it is important to realise that if you make a mistake you can face unlimited personal legal and financial liability. The estate cannot be fully distributed until Inheritance Tax is paid – so if funds can’t be released from the estate you may need to take out a short-term loan to pay IHT (Inheritance Tax on property can usually be deferred and payment by instalments negotiated) and this may also apply if there is no funeral provision. If you have agreed to become an executor and then decide against it, after someone has died, it is important not to undertake any actions in relation to the will or the estate as you may become legally liable.
- Make sure you have found the last will and testament –
If you do agree to become an executor for someone make sure you know who their solicitor is or who holds their last will and testament – ask for a copy of the will and any accompanying letter of intent, so that you have a good understanding before they die of how they would like their estate distributed. If you have not located the correct will and close the estate the consequences can be very serious. Furthermore, all sorts of problems can arise when a will is poorly drafted as any ambiguity can make executors more vulnerable to liability through error. Many people now choose to write their own wills using a prepared form from a stationery shop – if this is the case, make sure that it is valid (for example it must be signed by two completely independent witnesses).
- Make sure you get several copies of the death certificate and have all the other information you need to proceed efficiently –
If you are registering someone’s death you need to contact their GP within 5 days of their death to get a valid medical certificate which will then allow you to register the death. It is important to get several copies of the death certificate to ensure that they are available for life insurance, pension companies, banks, employers etc. Other personal information that you will need are the deceased person’s NI and NHS number, date and place of birth, date of marriage if applicable, and tax reference number.
- Find out as soon as you can if you need to apply for a Grant of Probate –
Applying for probate will give you the legal authority to administer and distribute a deceased person’s estate. If the estate is valued at below £5,000 or it is being passed directly to a spouse grant of probate is not usually necessary – but in most other cases you will need to apply. Visit your probate registry to get advice and help, but remember that you can only apply for grant of probate if someone has written a will and named you as the executor, and you can only receive it after you have valued the estate and paid Inheritance Tax. You will then be able to pay other debts and share the remains of the estate amongst beneficiaries. If you are acting for a close family relative who hasn’t written a will (someone who has died intestate), you can apply to become the administrator and receive ‘letters of administration’; this role carries the same legal responsibilities as an executor.
- READ the will carefully –
You need to really understand the contents of the will and the basic legal terminology used to make gifts and create trusts etc. If you have any doubts or concerns seek professional legal advice as this can save a lot of problems in the long term. If you are not happy to proceed you can formally relinquish the role of executor to a solicitor or bank (you will need to inform the Probate Office and sign a Deed of Renunciation) and you must do this before you carry out any ‘executor’ duties.
- Finding Beneficiaries and Claimants –
It is important that you show you have done everything within your power to track down estate beneficiaries and claimants. You should notify the general public of the estate, normally by placing a notice in the London Gazette (the official Government Journal of Record). If the estate includes land you are also expected to put a notice in the relevant local newspaper. If a beneficiary or creditor appears after the estate has been distributed, the executor can still be held financially liable.
- Ensure you have gathered in all assets and considered all liabilities
Probate is the period in which you account for all assets and liabilities and work out if Inheritance Tax (IHT) is due although you can ask HMRC to work out the tax liability for you. The first instalment must be paid within six months of the person’s death, starting from the end of the month in which they died (NB: this usually excludes tax payable on any property which can be deferred, though interest maybe payable). You cannot receive Grant of Probate or pay any other debts or beneficiaries until IHT has been paid so it is important to work this out as quickly as possible. Once again if you can talk to the person while they are alive it is a good idea to ask for account details and passwords, details of shares, overseas assets or property, and any long term debts including credit cards or hire purchase schemes.
- Keep on top of the job –
It is vital to keep an accurate and up-to-date paperwork trail in case beneficiaries or creditors ask to see how you are managing the estate; this also helps you to keep track of your own expenses and maintain detailed probate accounts for HMRC, which must be submitted to the Revenue even if Inheritance Tax isn’t payable. Your role is to protect the estate for beneficiaries so ensure that any property is still insured prior to sale and that if it is uninhabited the insurer knows this. You should also let utility companies know if the main house is vacant so that the estate is not paying any unnecessary bills.
- Get a second (or third) opinion when you are valuing property for probate
It is very important that you have documented proof that property belonging to the estate has been accurately valued, including the main home and its contents, as well as valuable objects such as antiques, jewellery or vehicles. It is advisable that you ask more than one qualified person for current written valuations. Executors are ultimately held responsible for valuing an estate and if HMRC believe you have undervalued property (even inadvertently) they may pursue you for unpaid tax and impose a penalty for negligence – the penalty can be between 30-100% of the additional tax liability. In 2010 HMRC challenged over 9,300 property valuations submitted for probate (60%), 30% of which were upheld. HMRC recommends using a professional valuer or surveyor in addition to or instead of a high street estate agent.
- Protect your own interests –
As an executor you can reclaim ‘reasonable expenses’ but will not to be paid a salary/fee, unless expressly stated in the will or unless you are employed as a professional executor, so make sure you keep an accurate running total of your costs. It is worth considering executors insurance, which is a form of indemnity insurance very similar to the type of professional liability insurance held by a solicitor. Executors insurance can protect you against any legal or financial claims that result from your actions and the cost of insurance can often be reclaimed from the estate as part of your expenses.