By paralegal Laura Williams and solicitor Emily Wentworth in the Tax, Trusts and Estates team at Irwin Mitchell
Losing a loved one can be a difficult and daunting time if you've been made responsible for administering the estate. Here's a brief guide of what needs to be done once the death has been registered, the funeral arranged and a Will found, if there is one.
Notify all account providers
If you haven’t already, all account providers will need to be notified of the death. You'll need the death certificate, or if there is an inquest, the Interim Certificate of Fact of Death to do this. This will freeze the accounts, though funds can be made available for the funeral and any inheritance tax.
You should notify all account providers including, banks, building societies, pension and income providers, creditors/debtors and utilities. If there's a property in the estate, it's very important the building insurance provider is notified as soon as possible. It's likely that the terms of the policy will change upon the death of the policy holder or the property becoming vacant. There may also be additional visitation requirements if the property is now unoccupied.
What is a Grant of Representation (‘Grant’)?
A grant is the formal document issued by the court which confirms a person(s) authority to administer an estate. There are different types of grant and which one you should apply for will be dependent on whether or not a valid Will has been left, as well as the circumstances surrounding who has been appointed as the executor(s) if there is a Will.
Do I need to get a grant?
This depends on the value of the estate and the assets owned. Some banks or building societies may release the funds without sight of a grant, in which case this stage may not be necessary. You'll likely need a grant if there's property to be dealt with.
How to get the grant if you need one
In order to get a grant of representation, an inheritance tax account will need to be produced and reported to HMRC and subsequently an application made to the Probate Registry. An inheritance tax account will need to be produced regardless of whether the estate is taxable or not.
To make an inheritance tax account, you'll need to work out the value of the estate as at date of death. If there's property or personal items of value, you should have these formally valued.
Which inheritance tax form is required depends on the complexity of the estate and whether or not it's taxable. For simple, non-taxable estates will often require an IHT205 which can be sent directly to the Probate Registry.
For more complex and/or taxable estates you will require an IHT400 which will involve producing an inheritance tax account to HMRC prior to applying for the Grant. All IHT accounts should be submitted within 12 months to avoid penalties and inheritance tax paid within six months to avoid interest accruing.
If you're worried about filling out these forms, get in touch with a professional who can advise you on the best way forward.
Gather in the estate funds
By this stage, the grant has either been issued or you didn’t require the grant to release all estate assets. If you needed the grant, at this stage you would need to provide this to the account providers to allow them to release funds along with their respective closing/encashment form; these funds should be kept completely separate from your own. You may also go ahead with the completion of any property sale.
Once all funds have been gathered in, all liabilities must be settled. It's the responsibility of you as executor and/or administrator to ensure this is done, as you remain personally liable for any debts of the estate - even those you are not aware of. This will include date of death liabilities and any administrative or testamentary expenses that have been incurred. If all liabilities aren't settled before distribution, you could be personally liable for them.
Pay the tax
As executor and/or administrator, you're responsible for ensuring the deceased’s tax affairs are in order. You should ensure their income tax affairs are settled, together with ensuring any capital gains tax liability and inheritance tax liability has been considered and paid if necessary.
Finalise and distribute
The beneficiaries may request sight of statements, invoices and any other evidence of transactions to evidence how you have arrived at the final distribution figure. They're entitled to this and you may wish to instruct a professional to collate some estate accounts, which show all financial movement from date of death to date of distribution.
Once all assets have been gathered in, liabilities settled and the tax position finalised, you're in a position to distribute the estate. The estate should be administered in accordance with the Will if there is one, or in accordance with the intestacy rules if there isn’t.
How can we help?
As an executor or administrator, you don't need to face these tasks alone. If you like, you can instruct a professional to help or advise you in respect of all or some aspects of the estate administration, which often comes at a very emotional time with the death of a loved one. Should you need help with any aspect of administering an estate, please contact us.