After your loved one has gone, if you are the executor of their estate, you will need to carry out duties including paying the necessary tax, settling outstanding debts, freezing bank accounts and collecting any monies due.
In order to do this, you’ll need to be able to prove to the relevant authorities that you have control over the estate. Usually, this is managed by showing them a copy of the Grant of Probate if a Will is in place, or Letters of Administration, if the estate has been passed into intestacy. Both are available from the Probate Office but, unless the value of the estate is under £5000, it can often be easier and less costly in the long run, to appoint the services of a probate professional.
This documentation should ensure that you can then liaise with the necessary organisations in order to progress with probate, collect monies due into the estate and pay off all the deceased’s debt, before distributing any assets.
Falling house prices may mean that up to £90 million could be reclaimed by beneficiaries.
Recent data has shown that house prices have fallen by around 11 percent over the last four years, with many properties sold for far less than their original probate valuation.
Some people may simply accept the fact that the property left to them was sadly sold for less than anticipated – without looking at the bigger picture.
Inheritance Tax liability is calculated on the overall estimated value of an estate – which includes the probate valuation on properties. Should the property then be sold for less than anticipated, the beneficiaries may be able to claim back some of this money.
It is estimated that around 21,0000 estates could be affected by falling house prices since June 2008, with the average claim worth around £4,260 – a financial lifeline for many people.
If you have lost a loved one, you may be faced with the choice of dealing with probate yourself, appointing a solicitor to deal with probate on your behalf, or using a fixed fee probate service.
It may be the first time you have found yourself in a position where you need to deal with probate, and the prospect of doing so can be daunting at a time when you are grieving. This guide should help you to decide whether to deal with probate yourself, or appoint a fixed fee probate service.
Has The Deceased Left Assets of Less Than £5000?
If your loved one has left assets of less than £5000, after funeral expenses you will not need to apply for probate at all. You will just need to provide your bank with proof that your loved one has died to access their accounts. Some banks have raised this limit to £10,000, so do check with the deceased’s bank.
Are Your Loved Ones Assets Held in Joint Accounts?
If all of your loved ones financial assets are held in joint accounts with you, you won’t need to apply for probate. Again, you will just need to provide proof that your loved one has died, to the financial institutions involved and they will transfer the joint accounts into your name.
Are Children Under the Age of 18 Involved?
If children under the age of 18 are entitled to some of the deceased’s assets, it is wise to seek legal advice or contact a specialist fixed fee probate service to deal with the estate on your behalf.
Are the Deceased’s Financial Affairs Complicated?
If the deceased’s financial affairs are not straightforward, it may be better to use a fixed fee probate service to deal with the estate on your behalf.
Do You Feel Comfortable Calculating Taxes?
Part of your loved ones estate may be liable for inheritance tax. This will involve dealing with HMRC and calculating any taxes owing. If you don’t feel comfortable doing this and you are worried that you might get it wrong, it is better to get a specialist company to deal with probate on your behalf.
Is The Will Likely to Be Contested?
If relatives of the deceased are likely to contest the will, it may be less stressful for you to appoint a specialist probate service to deal with the estate on your behalf. Even if the will is unlikely to be contested, those who are entitled to benefit from it may not understand how lengthy the process is, and they could put pressure on you if you are dealing with probate yourself. If you use a specialist fixed fee probate service, you will not have to deal with the additional stress this may cause you.
A lifetime gift is any gift made to a person from your estate to help minimise the effect of Inheritance Tax.
These gifts in the form of CLTs may become liable for Inheritance Tax at the time they are given and again, if you should die within seven years of making the gift.
CLTs are lifetime gifts given to a discretionary trust or possession trust over seven years before the date of your death, and will be liable for any Inheritance Tax due at a rate of 20% above the Nil Rate Band under these circumstances.
PETs – that is lifetime gifts made to another individual or to a simple trust, will not attract IHT and could be exempt altogether, if you live on for at least another seven years after the gift is made.
Should you die within seven years after making these gifts, IHT will be charged at a rate of 40%, although any credit and taper relief will be taken into account.
Many adult children do not realise that, should their parent die, they will not automatically receive a percentage of their property.
Where a property is held by “joint tenants” rather than “tenants in common”, particularly when a divorce has occurred and a parent is living with someone else rather than remarrying, English law states that their portion of the property will automatically be transferred to the surviving tenant, regardless of what is written in their Will, known as “survivorship”.
This is just one of the reasons why a Will should be prepared by a professional, rather than using a DIY Will writing package. The Will writer will ensure that the property is held by tenants in common rather than joint tenants, so that should the person require the Will to dictate that their child will benefit rather than the other tenant, this can then take place.
If the property is currently held as joint tenants, this can be formally severed and a new agreement put into place under this amended status.
Online wills are only ever usually recommended for the simplest of estates. They are of course quick, relatively easy to prepare and perhaps most importantly in today’s struggling economic environment, cheaper than a professionally prepared Will.
Should you die without having a Will in place, your entire estate will be processed and distributed according to the English laws of intestacy, which can prove very stressful and upsetting, should some nasty surprises crop up.
It is then, very important that you prepare a Will of some sort. Online and DIY Wills are an alternative option but we have seen in recent years, an increasing number of contentious cases due to a mistake made by an individual as they prepared their own Will.
As well as glaring errors causing undue stress upon loved ones left behind, rectifying the mistakes can prove considerably more cost than it would have taken to have the Will prepared professionally in the first place. Remember too that should you choose to write your Will yourself, you have not planned to minimise any Inheritance Tax due on your estate, which could place increased financial burden upon your family after you’re gone.
It is more common than you may think, for a person to promise to make someone they love a beneficiary of their estate, only to fail to live up to that promise, on their death.
For example, an elderly lady with no family may promise to leave a sum of money to a kindly neighbour or friend, only to then leave her entire estate to charity.
Or perhaps someone who cares for an individual may be promised items or money, only for it all to be left to a distant relative instead.
It could be argued of course, that this decision was made at the discretion of the deceased person who of course was entitled to change their mind and not inform the person.
Be wary of relying upon a verbal promise made by an individual, if it is not supported formally through a Will.
To make a claim in this instance, the court must decide whether or not the surviving person was “reasonable” to rely upon the promise and whether they have suffered considerable harm from it not being followed through.
Last week, The French government has passed legislation stating that all British expats must declare any inheritance trusts in which they have been named or any they have set up for relatives in the UK, to avoid facing a fine of up to £8000.
The legislation includes those basic life insurance policies which were put into trust to minimise IHT liability. It also includes those who have put their French holiday home into a trust or who hold French assets in a trust.
Trusts can be as small as those valued at £1000 or even less, but for those worth in excess of £200,000, the imposed fine will be set at a 5% charge.
The government originally gave only a few days’ notice, requesting all information to be submitted by 15 June – which has led to many disgruntled expats calling the move “greedy” and a suspicion that it will use these fines to ease its own national debt. However, this deadline has been extended, although no one is yet sure when it will eventually fall.
Wealthy individuals are likely to be hardest hit, with those whose estate exceeds £1.05 million, still having to pay a tax bill of 0.25%-0.5% after five years of full residency in France.
Now you have bought your first home, you have substantial assets which need to be protected if the worst happens.
Just think – if you die tomorrow and haven’t made a Will, not only will the government request a significant percentage of the value of the property as Inheritance Tax payment, but it will also dictate who will benefit from your final intestate, as part of the intestacy process.
You will have no say whatsoever in what happens to your money and property after you die, even if you only co-own the property.
To ensure that your loved ones will be well taken care of after you’ve gone and that those who should benefit from your estate do so, simply take a couple of hours this week to have a Will professionally prepared for you. This will put your mind at rest, knowing that the home you have worked hard to buy will be safe, even after you’ve gone.
The latest figures released by the Probate Service have shown a decline in the number of solicitor applications made for grants of probate.
56% of all grants were issued to private individuals in 2011. This is a major increase on 2010 when just 36% were personal applications. Why are so many people rejecting solicitor’s probate services?
A Guardian article titled The £600m RIP-off published in 2009, sparked a media frenzy of negative publicity for banks and solicitors offering probate services. At this point, High street banks and solicitors had a massive 88% share of £1.25 billion probate services market. The £600 million is actually a reference to a quote from Adam Walker of Final Duties, who claimed that half of this was blatant over-charging.
"It's a £600m a year rip-off, where banks and solicitors are charging large fortunes to sort out small estates. It's worse because they prey on grief-stricken families who are not in a mood to argue, or shop around.”
The reason for this is the archaic way that fees are calculated, based on estate value. Some probate companies charge between 1-4% of the estate value for their services. The problem is, this is not always in proportion to the amount of work that must be carried out to administer the estate. For example, one determining factor in the amount of time and paperwork involved in winding up an estate is how many financial institutions assets are spread over. An estate with 4 bank accounts will involve more work than one with 2, regardless of the amounts of money involved.
Solicitors with traditional hourly-rate/ plus disbursements, pricing structures have also been criticised. Consumers have reported on the unwillingness of solicitors to quote a fixed price, using the ‘how long’s a piece of string?’ argument. Ultimately leaving consumers shocked and confused when they get their final bill. With rates of up to £400 per hour, plus extra charges for court fees, extra client support, postage, stationery, receiving emails, sending letters etc., it’s no surprise that people opt for a fixed fee probate service.
More, and more reports and damming evidence came to light from Which?, The Daily Mail, BBC’s Rip-Off Britain and Panorama. It is indeed possible that all this negative media attention has led to the rise in personal probate applications.
There’s no need to fall into any of these traps, you can still get a fair price for probate. Use a company that offers a low-cost fixed fee probate service. Make sure that fees are agreed in advance and that you fully understand the service that will be provided. Get a full breakdown of what’s included in the fees and any extra charges your likely to incur. Watch out for small print and any hidden extras.