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What is probate? How it works and how to execute a loved one's will

How probate works and how to execute a loved one's will
How probate works and how to execute a loved one's will

Sorting out a late loved one’s finances is never going to be easy – but understanding how the probate system works can make it an awful lot less stressful and time-consuming.

If you have been named as executor in a friend or relative’s will, then you are responsible for dealing with their finances when they die.

However, before releasing their funds, banks and other firms will usually require proof that you have the legal authority to distribute the estate. This is called a grant of probate. About 5,000 are issued every week in England and Wales, according to official statistics.

If the deceased had no property and an estate worth less than £10,000, you may be able to avoid the stress of getting a grant. But the vast majority of executors do require one.

Yet there have been reports of widespread delays with the probate system, with some families having to wait months longer to gain control of their late loved one's finances.

Here is what you need to do to make the process go as smoothly as possible.

Register the death

It is a legal requirement to register the death within five working days (eight in Scotland). Once this is done you will receive a copy of the death certificate.

Financial institutions will require one when you register the death with them, so it is important that you order multiple copies – four or five – just in case. Each will cost you £11 in England and Wales. Confusingly, banks will sometimes ask for an “original certificate”, but this just means a certified copy. You can order more at a later date if needed.

Find the will

The will should name an executor – the person responsible for dealing with the finances.

Simon Hancox, of estate planning service Kings Court Trust, said: “An individual is not obligated to fulfil the role of an executor and they can choose to renounce it.” You can appoint a solicitor to act on your behalf, or decline the role by signing a renunciation, if you do not feel up to the task.

If there is no will, then you will need to apply for letters of administration. This process is virtually identical to applying for probate in all but name.

Once you have the will you should notify all the beneficiaries and place a notice in the Gazette, the official public record, asking potential creditors to come forward. This may sound excessive, but it is necessary to show you have carried out your legal duties as executor.

Joe Cobb, of the law firm JMW Solicitors, said: “Should the executor fail to take the correct measures in identifying the potential creditors and then one comes forward after the assets have been distributed, the creditor may pursue the beneficiaries for the outstanding amount.”

Arrange the funeral

The deceased may have left instructions for their funeral in their will. Funeral costs are notoriously varied but on average you should expect to spend £3,953 on a "full" service, according to the insurer SunLife.

Luckily, some banks will pay out funeral expenses before probate is granted. If not, you can later recover the fees from the estate.

“Executors or Administrators can be reimbursed for reasonable expenses from the estate, which could include probate registry fees, funeral expenses, property maintenance, postage costs, the cost of death certificates, property insurance costs, clearance costs, valuation fees and so on,” Mr Hancox said.

Contact the organisations

Use the Tell Us Once service to register the death with the various government departments, such as HM Revenue and Customs and the Department for Work and Pensions.

You should also contact the banks, pension providers, investment firms and other companies the deceased held funds with.

If the deceased held accounts with any of the following firms, then you can use the Death Notification Service to make things things easier for yourself by notifying multiple organisations at once:

Once the institutions have been informed of the death, they will freeze the assets until probate is granted. However, they may release funds earlier if they are below a certain threshold. These vary from company to company, as our table demonstrates.

Value the estate

Having contacted the above organisations, you should now have a picture of how much the estate is worth. This should include any outstanding debts, such as tax owed to HMRC.

Property is often the biggest asset in estate and you can generally get an estimated valuation of this by looking at the sale prices of similar properties.

However, you may need to get the property professionally valued by a surveyor or an estate agent if you believe there could be an inheritance tax liability. Typically no IHT will be due if the value of the estate is below £325,000 or if the deceased left everything to a spouse, civil partner or charity. The deceased will also have an extra £175,000 nil-rate band if they left their main home to a direct descendant.

The Government has an online checker tool to work out if IHT is due. If it is, then you will need to complete form IHT400, then wait 20 days before applying for probate.

Apply for probate

Once you have valued the estate and filled in an IHT form, if needed, you can complete a probate application form (PA1P) or apply online.

In England and Wales, there is no application fee for estates smaller than £5,000. For estates above this threshold, the fee is £273.

In Northern Ireland there is no fee for estates smaller than £10,000, otherwise a £261 fee applies.

In Scotland, no fee is due for estates below £50,000. Between £50,000 and £250,000, it is £266. For estates bigger than £250,000, there is a £532 fee.

Pay inheritance tax

IHT must be paid by the end of the sixth month after the death. Unhelpfully, the probate office will not grant probate until after IHT has been paid.

The executor can apply to banks with IHT 423 form and request for HMRC to be paid directly. However, if there is not enough in the deceased’s bank accounts – for example, because the money is tied up in property – then you may have to cover this out of your own pocket.

If necessary you can apply to HMRC to defer the payment, splitting it into 10 equal instalments, and then recover the funds once you have probate and the assets are sold. However, you will have to pay interest on the deferred payment.

How long does probate take?

For years probate registries, responsible for issuing these grants, have been beset with delays. As a result it is currently taking seven weeks on average to obtain probate, according to HM Courts & Tribunals Service.

However, the Government warns it could take as long as 16 – and it will take even longer if you are applying for letters of administration, as the table below shows.

Once probate is granted and the assets sold, the executor can distribute the estate among the beneficiaries.

“Executors will need to produce estate accounts which will show the beneficiaries are receiving their full entitlement,” said Mr Hancox.

“They should also keep a record of any payments made to beneficiaries. Executors are responsible for maximising the inheritance of beneficiaries, so every effort should be taken to administer the estate efficiently and effectively.”