Here we are at session number 45 , and we’re going to be talking about applying for probate and administering an estate. When someone dies, someone else has to sort out all their affairs. Many of you will be asked to be an executor, maybe to your parents, so it’s good to know how this process works for when the time comes.

In the previous 44 sessions of this podcast, we’ve talked primarily about dealing with your own finances. This time, we’re talking exclusively about organising someone else’s affairs. As if that isn’t difficult enough, that other person isn’t around any more to help you!

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As usual, after the main body I’m going to look at the most recent reviews that have been left by listeners, and announce the next session topic. I’ll also explain another key personal finance term in the Glossary.

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But first…

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Introduction

One day, we’ll all shuffle off this mortal coil and someone else will have to sort out our affairs too. But before that, chances are you will have to act as executor to someone you know who has died. The process is fairly simple, at least in theory, but it helps to have it laid down in simple terms, and that’s the plan for this session. As ever, I’ll give you first what you need to KNOW and then move on to what you need to DO.

Don’t forget that all the links, documents and other resources I mention on the show can be found at the shownotes for this session which are [HERE!]

Everything you need to KNOW

Part of the title of this session is Applying for Probate. The document you apply for is called a Grant of Representation. When you have this you are granted Probate (if there’s a will) or letters of administration (if there isn’t).These give you the right to deal with the deceased person’s estate.

We’ll cover the specifics of the process of applying for probate and everything else you need to do in the DO section, but first here are some things you need to know:

1 – The process is much the same whether the deceased has made a will or not

That’s one of those headings where it’s a little difficult to come up with much else to say, but I’ll do my best!

Many people will know that the distribution of someone’s estate is laid down by law if they die without a will, called dying intestate. If there is a will, then the will itself determines who gets what, But if there is no will, the distribution of the estate is governed by the laws of intestacy.

There’s no time to go into the breakdown of how all that works here, but the Gov.uk website has a great set of flow-chart pages here which walk you through it by asking questions like “Is there a surviving spouse?” etc.

But the actual process of getting to the point of being granted the right to administer the estate of the deceased person is much the same whether there’s a will or not.

2 – You may not need a Grant of Representation at all

A Grant of Representation gives you the right to administer the deceased person’s estate. This document will be needed by banks, building societies, insurance companies, utility providers in order for them to deal with you.

In cases where the amounts of money are small however, it may be that the deceased’s bank will deal with you without needing to see a Grant of Representation at all. They will still need to see the death certificate, maybe the will and some ID from you as executor, but you can produce all that pretty quickly without waiting for Probate to be granted.

Many banks will release enough money from the deceased person’s bank account to pay funeral expenses, probate fees and inheritance tax, but it is important to know that they’re not obliged to do that. It entirely depends on the policy of the institution in question.

3 – You may not need a solicitor (but you probably will)

The process of applying for probate is, as we shall see, fairly formulaic. Follow the steps and you won’t go far wrong – you probably don’t need a solicitor for simple estates.

But in reality, many estates will require more than just the standard form filling. Here are some circumstances in which it is advisable to seek the help of a solicitor or probate specialist:

• If there are any uncertainties in the terms of the will
• Part of the estate is to pass to children under age 18
• If any part of the estate is left in a trust
• If any part of the deceased person’s estate is held abroad
• If the deceased person owned a business
• If anyone is likely to dispute the will

Thanks to the Citizen’s Advice website for that list. As you know by now, I’m a big fan of getting experts in to do a job right. The cost of paying a solicitor will be far outweighed by the legal costs of putting right any mess caused by you making a catastrophic mistake. If you’re sued one day by a beneficiary who is currently a child, that could get expensive very quickly. If there is anything out of the ordinary, pay a lawyer to apply for probate for you. Remember that the costs of the process will be paid by the estate, but if you screw things up, you’ll be paying the legal bills yourself. The best place to find a solicitor near you is the Law Society website.

You can however, do a lot of the leg work yourself, which may well reduce the legal bill somewhat, which has got to be worth doing. Stay tuned for how to do that.

Everything you need to DO 

Right, let’s get to the practicalities. Someone you know has died and it’s left to you to look at what needs to be done. There are six steps to doing the job right – let’s deal with each in turn.

1 – Check if there’s a will

The first and most obvious step is to check if the deceased left a will. The statistics differ depending on what you’re reading, but it’s clear that a majority of adults in the UK, some say up to 65%, have not made a will.

In some cases, there may be a will, but it may be invalid for whatever reason. Or it may be that no executors are named, or that those who are named are unable or unwilling to act as executors. In these cases you will need to contact the Probate Registry to find out the course of action. Someone else will have to step up and apply to be the executor and the courts will have to ratify them to act as such.

If there’s a case for keeping your own will up to date, this is it. I saw a client recently whose wills were drawn up in 1990, 24 years ago. They have one executor, a man ten years older than them who is not in the best of health. Since the time the will was drafted, they have grandchildren. There are so many reasons to update their wills and yet the reason they haven’t is that they just haven’t got around to it.

Make sure the folks left to sort out your affairs don’t find themselves in this awkward position – update your will now!

If there is a will and it’s all pretty clear, or if there is no will at all, you need to move on now to the next step

2 -Apply for the Grant of Representation

There are four steps to gaining a Grant of Representation:

i. Complete a Probate Application Form

This is form PA1 and you can download it here [LINK]. The form asks questions about the deceased and their relatives, and about the person applying for the Grant of Representation. It also requires some figures to be added from the relevant Inheritance Tax form, which I’ll come to in a minute.

Form PA1 isn’t particularly complicated; anyone with some common sense and a knowledge of the deceased and their family will be able to complete it.

ii. Complete an Inheritance Tax form

The relevant page on the HMRC website which lists the Inheritance Tax forms actually has more than 25 different forms which may or may not apply to the estate you are dealing with. If the estate is small, you may not need to complete a full Inheritance Tax return. You’ll probably need form IHT205 for this. If a full return is required, you’ll need form IHT400.

But there are myriad supplemental pages to these forms as well as schedules that may be required and guidance notes explaining it all.

Some forms go off to the Probate Registry, and some straight to HMRC. Either way, you’ll have to complete the necessary forms correctly in order to move things forward

iii. Send off the forms

When the forms are complete, you must send them to your local Probate Registry. The local one to me is Exeter – two hours away at a push. It is possible that you may have to attend an interview at the Probate Registry, so choose the one nearest to you – as if that wasn’t obvious!

You’ll need to send the form PA1, plus the following:

• • The original will and any codicils to the will (a codicil is an addendum to the will)
  • Three A4 photocopies of the will and codicil(s)
  • The original Death Certificate
  • The inheritance tax forms, as applicable
  • The probate fee – currently £105 for estates valued over £5,000

iv. Swear an Oath

This is your promise that the information provided on the forms is correct to the best of your knowledge. The oath can be sworn at the Probate Registry or at the office of a commissioner for oaths, usually a solicitor more local to you.

If all is well, and any Inheritance Tax due is paid (see the next step) the Grant of Representation will be issued.

3 – Pay any Inheritance Tax due

Before the Grant of Representation is issued, any Inheritance Tax IHT due must be paid.

The calculation for working out if any IHT is due is fairly simple:

• Add up the value of the deceased’s estate, ignoring any assets held as Joint Tenants
• Deduct any debts outstanding, such as utility or tax bills, or rent due
• From this total, deduct the Nil Rate Band of £325,000. In some cases the deceased may benefit from their dead spouse’s Nil Rate Band as well as their own, meaning they have £650,000 to deduct from their estate
• If there is any money left in excess of the Nil Rate Band, it is chargeable to inheritance Tax at 40%

Here’s an example:

• The late Pierre Mattieu has assets worth £750,000
• Pierre was calling premium rate chat lines in the weeks before his death, so he has an outstanding BT bill of £50,000, leaving net assets of £700,000
• He was a confirmed batchelor, hence the chat lines, so he only has his own Nil Rate Band of £325,000 to take off this figure, leaving £375,000 taxable estate
• This is charged at 40%, which means tax of £150,000 is payable

There are lots of potential complications here, such as if gifts were made in the seven years before Pierre’s death or if trusts are involved, or pensions, or charitable gifts. Lots to think about…

One major potential hiccup here is available money with which to pay the Inheritance Tax. Using the example of Pierre above, what if his £750,000 estate included a property worth £700,000 and £50,000 of cash? If £150,000 of tax is payable to HMRC for the IHT, where is this going to come from? Answer, the house will have to be sold to release cash to pay the tax. Not an elegant solution, but something to think about. If there is not enough cash to pay the IHT, you have a problem.

In some cases, a portion of the Inheritance Tax can be paid in order for the Grant to be released, but the balance must usually be paid whiting six months from the end of the month in which the deceased person died.

4 – Collect all the assets

At this point, the Inheritance Tax has been paid and the Grant of Representation has been issued. You are now free to move forward with the job of executing the deceased person’s will.

By now you know how much the deceased was worth, but you have probably just been getting information from the various sources of wealth, such as banks or building societies, insurance companies, investment houses and pension providers. Now you must approach them and, probably, encash the different assets. You’ll need to send the companies the a copy of the Grant to enable them to do this.

You may need to open an executor’s bank account to collect the proceeds.

5 – Pay any debts

Chances are there were some debts outstanding at the time of death. Perhaps the BT bill needs paying, or maybe something bigger like a tax bill. Anything which the deceased person owed must be paid before the estate is distributed.

It’s important – debts do not die with you but must be paid from your estate before anything is given to your beneficiaries.

6 – Distribute the estate

Once all the collecting of assets and paying off debts has been done, the estate can be distributed in line with the wishes of the deceased, as exposed in the will. Often this will require just writing cheques to the beneficiaries, but it may also require certain items to be handed over to those entitled to them. Maybe jewellery, or other heirlooms, or even specific investments that will need to be transferred in kind.

Summary

All in all then, it’s not a job to be sneezed at. It can be a lot of work, often for no reward if you’re not named as a beneficiary yourself. The difficulty of the job is directly related to the quality of the records kept. Having to hunt for information in the deceased’s property, and then track down the missing information from insurance companies and other providers takes a lot of organisational skill and dedication, plus perseverance when the information you need isn’t immediately forthcoming.

So two lessons to take from all this:

• Don’t take on the role of executor lightly, and
• Get your own house in order, because you don’t know when your day will come!

The Gov.uk site is an excellent resource for everything you need to know about this subject. Plus there is a very good summary guide PA2 on the Justice website. The Citizen’s Advice Bureau also has a very good section dealing with all this.

If in doubt, see a solicitor. Yes, the estate will pay them for the work they do, but they should do a good job and will have gone through the Probate process many times before. When agreeing a fee with the solicitor, make sure the fee is expressed as a fixed fee, or at worst, agree an hourly rate. Don’t ever agree to a fee expressed as a percentage of the estate.

Being an executor is a responsibility, but it is also a privilege. It might not seem like it when you’re bogged down in the details of the administration of the estate, but the deceased person trusted you to sort things out for them after they had gone. I reckon that is a singular honour, and when my time comes to act as executor, I hope to do it to the very best of my ability.

MoneyMeaning

Term: Joint Tenants / Tenants-in-Common

When you own something jointly with another person, you will own it in one of two ways. The difference between the two is important, and particularly so on death, as it happens.

If you hold an asset, let’s say it’s a house, as Joint Tenants with another person, you both own all of the property. If one of you dies, their half will immediately pass to the other person in full and it becomes their sole property. This is the case also with jointly held bank accounts – an important point to note.

If you own that house as Tenants-in-Common, then you own half of the house each, or a different percentage split if that is agreed between you. If one of you dies, their half forms part of their estate and is left to their beneficiaries.

Often couples who are on second relationships and who have children from their first marriages organise things this way to try and keep things separate for each family.

This week’s reviews

A lovely review from Ray Hughes this week. He says:

“This is the best podcast I have ever subscribed to. You get excellent unbiased advice, delivered in a very clear and structured format. Pete does an outstanding job of cutting through jargon and simplifying finance issues and provides a clear path to follow. Not only is his advice first class, his style of information delivery and voice is a joy to listen to and puts many professional radio presenters to shame.

Pete – keep up the excellent work. You are now top of my podcast list”

Wow – thanks so much Ray! Those are kind words indeed, and I’m really glad you’re getting value from the show.

If you like what you hear on this podcast, please leave a rating or review on iTunes by going to meaningfulmoney.tv/iTunes just like Ray did this week. This helps others to hear about the show and to subscribe, because it keeps me near the top of the rankings.

News

Just one pound lost this week down to 17st 5.5lbs, but I didn’t make it to the gym at all, plus it was my wife’s 40th birthday last weekend so a large amount of caution was thrown to the wind while we celebrated. It wasn’t quite the weekend we’d hoped for as our youngest daughter wasn’t well, but we’ll rearrange the little trip we had planned for a few weeks time, probably my birthday weekend. My birthday is the 23rd February by the way. Fair warning so you have plenty of time to get me a gift.

Next Session Announcement

Next time we'll be talking about Financial Organisation. We’ve been talking about sorting things out when someone has died, but it makes sense to have your financial affairs in order even if you’ve no intention of dying any time soon. I’ll show you how to organise your financial information in a way which means that you’ll always be able to find what you’re looking for!

If you have a question on this subject, or any other financial query that you want answering here on the show, then the best way to do that is to leave me a voicemail at meaningfulmoney.tv/feedback

Outro

That's it for this session of the MM podcast, I hope it was helpful. Did I miss anything? Do you have any questions? If so, please leave them in teh comments section below.

I hope you enjoyed this session. Thanks for listening – I'll talk to you next time.