Probate – what you need to know

Probate – what’s changed?

The law has changed in respect of probate. The Lord Chancellor has granted approval for the ICAEW to offer probate services, subject to satisfying various requirements including passing probate exams. Curo Chartered Accountants is one of the first ICAEW – regulated firms in the West Midlands licensed to carry out probate work which we see as a natural extension of our existing services and includes tax planning, estate accounts and business valuation work.

Many people still don’t understand what probate is or how much of the process they can realistically carry out themselves. Worryingly, 60% of the people in the UK don’t have a will and 10% believe that the ‘right’ people will receive their intended bequest under the intestacy rules.


Probate explained and how to identify Personal Representatives

The term ‘probate’ refers to the process of dealing with a deceased person’s estate. Those administering the estate are the personal representatives (‘PRs’). The PRs have responsibility for not only administering the estate of the deceased but also distributing it correctly to the beneficiaries and providing information to the relevant advisors. Additionally, they are required to settle any tax liabilities with HMRC. Where there’s a valid will, the PRs are known as the ‘executors’. If there is no will, or individuals are not names/unwilling to act, they are known as administrators.

Firstly, a Grant of Representation ‘GR’ is required, giving the PRs legal authority to administer and distribute the estate of the deceased. The application for the GR depends on whether or not there is a valid will, named individuals and people willing to act. The GR is known as one of the three below:

Grant of Probate – a valid will is in place with willing executors

Grant of letters of administration with will annexed – there is a valid will but certain events have occurred which deny a grant of probate (e.g. no executor named in the will etc)

Grant of Administration – there is not a valid will; administrators are determined according to a hierarchy of entitlement (surviving spouse, children, father/mother etc)

Grants are required for all estates but there are exceptions which include the estate being valued at less than £5k.

Inheritance Tax – What is exempt and what are the HMRC obligations?

The rules have changed slightly removing certain estates from the IHT bracket, such as those valued at less than twice the IHT threshold AND 100% of unused IHT allowance remaining from a late spouse. There are also exemptions concerning domicile status and of course estates valued at less than the IHT threshold (£325,000 until April 2015; £329,000 for the year until April 2016).

HMRC reporting requirements – excepted estates are required to submit shorter, simpler forms including the IHT205.

Non-excepted estates require more forms to be submitted including a return showing the tax liability due, plus any reliefs. The calculation of tax liabilities and reliefs is something we specialise in frequently and we are well placed to support you in this area.

Tax payments – how does it all work and how do I pay?

Inheritance tax is due six months from the date of death with the option to pay in instalments where assets are realised over time, e.g. property.

Personal tax is payable according to normal self assessment rules, together with submission of a self assessment tax return due up to the date of death.

Additionally, any tax arising on income from an estate, such as rental on a property must be reported via a Trust or Estate Tax Return and paid by the due date.

What happens if there isn’t a will?

The intestacy rules cover the scenario where there is no will. If an individual dies intestate, there is an order of hierarchy setting out who will receive the distributed estate.

The rules changed in October 2014 and largely depend on whether or not children are involved.

If there are no children involved, the entire estate passes to the surviving spouse. If you do have children, the surviving spouse receives the first £250,000 and half the assets above £250,000. The other half of the excess is received equally by the children.

What can you do yourself and when should you hire a professional?

Losing a loved one can very an extremely upsetting time and for some, having to deal with the burden of probate alone can be too much to bear.

There are some areas where professional help really should be sought, such as business valuations and tax planning aspects.

As probate-qualified accountants, we can do as much or as little of the process as you like. It is important that all procedures are followed correctly, all relevant forms are submitted and amounts paid as they become due. We welcome your queries and are keen to demonstrate the significant advantages of appointing a probate-qualified accountant to carry out this work.

Please contact Julia Whelan on 01527 558539 or email [email protected] to discuss your probate requirements..