Many people are unsure about what probate is, and whether they will need it after their loved one has passed away.
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What is probate?
Probate is a collective name for the legal process of dealing with someone’s estate after they have passed away. If somebody passes with a valid Will, then you can apply for a Grant of Probate. If somebody passes away without a Will, then you apply for Letters of Administration. There are also other types of Probate that we might apply for, however this depends on the circumstances surrounding the Will, or lack of one.
Once probate is granted, assets can be released to the beneficiaries. Whether or not Probate is necessary will depend on the total value of the estate, and whether the assets were held solely in one name or jointly with a partner before the owner passed away will also play a part in determining whether Probate is necessary.
It will be up to the Executor/s of the will to carry out the probate process. They will be responsible for gathering assets, paying out debts and bills and then distributing what is left according to the wishes outlined in the will.
If you have been appointed executor of a loved one’s will and you aren’t sure where to start with probate, we can help you.
If the estate that you are in control of is considered to be a ‘small estate’ – meaning their assets add up to a value of around £15,000 or less – probate will more than likely not be necessary. However, all banks and financial institutions have their own minimum probate threshold, so you will need to check what this is to find out if you will have to apply for probate.
In the probate procedure, there are five main steps that you will have to complete. These are:
- Step One – Identify all assets, including; property, investments and possessions, and all liabilities, including; debts and bills. Assess these to determine the total value of the estate.
- Step Two – Pay any Inheritance Tax necessary to HMRC, submit an Inheritance Tax return form whether you had to pay any or not, and apply to the Probate Registry for the grant of representation which confirms your legal authority to administer the estate.
- Step Three – After receiving the grant, you can sell assets, settle liabilities and pay any final administration expenses such as income tax or capital gains tax.
- Step Four – Prepare the estate accounts which document as payments in and out of the estate to show to balance that remains to be distributed among beneficiaries, then send the details to the Will executor/s for approval
- Step Five – If there are no challenges, the final step is to transfer assets to the beneficiaries of the Will
Probate Procedure when there isn’t a Will
Nearly 70 percent of adults in the UK die without making a Will. Because of this, it is important to know how probate works if your loved one dies without a Will.
When somebody makes a Will, they appoint an Executor to be in charge of their estate. When somebody passes away without having made a Will, then the person who will be in charge of managing their affairs is known as an Administrator.
In this case, the law will determine who the person’s beneficiaries are, and then one of these must apply for a ‘Grant of Letters of Administration’ to become the Administrator who will be able to act in the same way as an Executor would.
The person who is appointed as an Administrator is determined by the rules of intestacy. If your loved one has passed away without leaving a will, our UK Probate solicitors here help you establish if probate is necessary and help you if it is.
Probate and Inheritance Tax
In the same way that not every estate will have to pay for Probate, not everyone will be required to pay Inheritance Tax. However, unlike the probate threshold, the Inheritance Tax threshold is set by the government.
Currently, the tax free threshold is £325,000 for Inheritance Tax. This is called your Nil Rate Band, and Inheritance Tax is currently set at 40% of your taxable estate over your Nil Rate Band.
If someone has died on or after 6th April 2017 and they owned their own property, then their estate may be entitled to a higher threshold. This is called the Residence Nil Rate Band, and the current value of the Residence Nil Rate Band is an additional £150,000 per individual; however this has increased to £175,000 in the 2020-2021 tax year. In order to qualify for the Residence Nil Rate Band, the deceased must have left their home, or at least a share of it, to their direct descendants.
There are also specific Inheritance Tax rules for married couples. In short, if you are married, or in a civil partnership, and you leave your whole estate to your surviving spouse, then there is no Inheritance Tax to pay on the death of the first person. If this is applicable, then after the death of the surviving spouse then there will be two Nil Rate Bands and Residence Nil Rate Bands to use before any Inheritance Tax is payable.
Inheritance Tax and Charity Gifts
If you should choose to leave a gift in your Will to charity, then it will be free of Inheritance Tax under UK law. Furthermore, if you decide to leave 10% of your taxable estate to charity then this will reduce your Inheritance Tax from 40% to 36%.
If your estate is worth more than £325,000 and you do not qualify for the Residence Nil Rate Band, then the likelihood is there will be inheritance tax to be paid.
If you are an Executor or beneficiary applying for probate, you will need to pay any inheritance tax to HMRC before the court will issue a grant of probate to you. This means that until you pay all Inheritance Tax that is owed on your relative’s estate, you cannot have access to it.
When you first apply for probate, you will need to value the money, property and possessions of your relative. There are three main tasks that you will need to carry out when you value their estate. These are:
- Contacting organisations such as banks, mortgage or loan providers and utility providers regarding the person’s assets, loans and debts.
- Estimate the gross value of the whole estate, including any ‘gifts’ that have been given and are worth over £3,000 per year for the past seven years.
- Report the value of the estate to Her Majesty’s Revenue and Customs (HMRC).
Valuing an estate can take between six and nine month. Without a valuation of the estate taking place, no assets will be able to be released, so it is advisable to begin the as soon as possible and a solicitor will be the best person to assist you throughout the process.
- What is Probate?
Probate is the name for the legal and financial process that may be necessary to go through after a person passes away.
This is in order for their assets to be released to the people they chose to leave them to in their Will, but will usually only be required if the person's estate has a value over a certain amount.
- Do I need Probate?
There is no definite answer to whether or not you will need to apply for probate. Really, it depends on how much your loved one's estate was worth and how much their bank/s set as their threshold for Probate to be required. The threshold is usually around £5,000, but differs for every bank.
- Who needs to apply for Probate?
If there is a Will, the Executor/s of the Will has to apply for Probate. If there is no Will, it will be worked out who the beneficiaries of the person are, and if Probate is needed one of these people will have to apply for it.
- Do I need a solicitor for Probate?
No, you do not need a solicitor for Probate, however it is a very complex process which is best handled by a trained professional. Either way it will cost you money, but if you seek the help of a specialist solicitor you will save yourself a lot of time and stress.
- How long do you have to apply for Probate?
There is no time limit on how long you have to apply for Probate after a loved one's death. However Inheritance Tax return forms must be submitted to HMRC within six months of when a person passed away, whether Inheritance Tax is owed or not.
- What is a Grant of Probate?
A Grant of Probate is a legal document which is applied for by the Executor/s or Administrator of a will. It confirms that the Executor/s or Administrator has the authority to manage and deal with the assets of the person who passed away. This is known as 'Administering the Estate'.
- How to apply for a Grant of Probate?
You can apply for a Grant of Probate by post or online on the government website if you are the Executor of a will for a person who has passed away.
You must have the original Will, the original death certificate or an interim certificate from the coroner, and have already reported the value of the estate.
If you are applying by post, you need to fill in the form PA1A, which you can find on the government website.
- When is Probate not required?
Probate is not required if a person's total estate value is low enough not to reach over the minimum threshold set by their bank/s. If you are the Executor of their will or a beneficiary if they left no Will, it is your responsibility to establish if you need to apply for Probate.
- Do all Executors have to apply for Probate?
No, not all Executors have to apply for Probate if multiple people have been appointed as joint Executors of a will. However, all Executors have the right to apply and can therefore apply together.
If you do not want to have a role in the administration of a will you can "renounce" your right to apply for Probate. This can only be done formally through a Deed of Renunciation. However, you cannot have already been involved in the administration or received any of the estate if you want to renounce your right.
- How much do solicitors charge for Probate?
Solicitors charge different amounts for probate services depending on their company policy.
Many solicitors costs will be calculated as a percentage of the estate. This percentage can range from one percent to five percent. Thus, if the estate holds a value of £100,000, you can expect to pay between £1,000 and £5,000 plus VAT.
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