Dealings with lawyers, banks and the taxman are something most people dread. So it is especially hard that families must handle all three within weeks of the death of a loved one.
Here is Times Money’s guide to probate and administration.
What is probate?
Probate is issued by the Probate Service — see direct.gov.uk — to the executors named in a will, granting them access to the deceased’s assets so that they can wind up the estate. Where a solicitor or bank is one of the executors, it will expect to handle the administration for a fee deducted from the estate. Where none is named, the executors are free to hire a solicitor or do the work themselves.
Securing probate — or a “grant of administration” — should be straightforward, even for the layman, but administering the estate is time consuming, involving tracing and selling assets, paying tax and debts and distributing what is left.
Advertisement
When a person dies without a will, relatives, or a solicitor, apply for letters of adminstration, which give access to the estate for distribution according to intestacy laws.
Probate for executors
If you are an executor and no bank or solicitor is named as joint executor, it is up to you whether to seek professional help with probate and administration or to tackle it yourself. Paul Elmhirst, author of the Which? Essential Guides — Wills and Probate, says that people considering the latter should be aware that many estates are complex, especially where inheritance tax is payable, family trusts are involved or there are beneficiaries aged under 18. He adds: “Without a solicitor, you could be liable later if you miscalculate tax, for example.”
He says that fees at a good provincial solicitors should come to about 2 per cent of a “fairly routine” estate and the work should take two months. He adds: “Shop around several firms for a free initial conversation and ask whether there is anything in the circumstances that could complicate and prolong the process.”
Kay Hornsby, of Help the Aged, says that the charity knows of many people who have administered simple estates without difficulty. The process — mainly a matter of letterwriting — takes about 20 to 25 hours, over a couple of months at least, and may involve several hundred pounds of expenses, including £90 for the grant of probate, deductible from the estate.
Advertisement
Problem executors
Where you are named executor alongside a bank or solicitor, contact that institution as soon as possible to discuss fees. These are especially likely to be high with banks. Mr Elmhirst says: “Bank fee scales are draconian. The work costs a percentage of the estate, regardless, which means an especially bad deal when an estate is straightforward.”
If you want to change a named bank or solicitor, Mr Elmhirst says to ask it to renounce executorship, giving a reason, such as “unreasonable” cost. He adds: “If you want another solicitor to take on the work, it will contact the unwanted executor and exert pressure.”
If an institution refuses to budge, and you think that its fees are unreasonable, you can threaten legal action, but going ahead with such action may be risky. Your local Law Centre or Citizens Advice Bureau can advise.
Keeping tabs
Be sure that you understand a bank or solicitor’s fee structure and tell the person handling your case how often you expect to be updated. Prompt administration is especially important when markets are falling — as a long wait before the sale of shares or property could result in serious financial loss for beneficiaries.
Advertisement
Mr Elmhirst says: “If a solicitor is taking a long time and not accounting for it, use the company’s complaints procedure. Your case will be referred to another partner in the firm and, failing that, the Law Society.”
Unresolved complaints to banks go before the Financial Ombudsman Service. Both can secure redress if a bank or solicitor is found to be in the wrong.
Probate for will-makers
If you are writing a will, you can make administration easier and more affordable for your beneficiaries by naming lay executors who can make their own decision whether to hire professional help. Update family or friends on the whereabouts of your most recent will and keep an up-to-date record of your assets. This will make administration simpler for lay executors or save thousands of pounds in solicitors’ fees.
Know the rules on inheritance tax
Advertisement
? Inheritance tax (IHT) is payable at 40 per cent on sums above £325,000. Bequests to a spouse, civil partner or charity are tax-free.
? Married couples and civil partners can also transfer the unused element of their IHT-free allowance to each other when they die, enabling the surviving partner to bequeath up to £650,000.
? Part of the tax is paid before probate is issued, with the rest due within six months of the end of the month in which the person died. Interest is charged on any unpaid tax after this.
? The tax is calculated on the value of the estate on the date of death, which means that you may pay tax on a house value that is out of date and higher than the sale price realised.
? IHT on a property or land can be paid in equal annual instalments over ten years, subject to the payment of interest. The tax is due in full on the sale of the asset.
Advertisement
? You have to complete a tax form whether or not IHT is payable. The Revenue has a probate and IHT helpline on 0845 3020900. For more information, go to www.hmrc.gov.uk.
Five news stories
Co-op steals a march on Tesco in the race for legal customers
Relatives condemn firms chasing dead woman’s cash
Michael Jackson: finances will take years to unwind
Judges to review the secrecy of royal wills
Barred from travelling with our mother’s ashes
Five features
Claim death duty rebate from the Revenue
How to track down lost treasure
Brief encounter: how to divide inherited land
Five websites