The procedure that personal representatives go through to gather the assets of a deceased person, pay off their debts and other obligations (including paying inheritance tax), and distribute those assets to the beneficiaries is known as estate administration, also referred to as “probate.”
If there is a Will, the executors listed therein serve as the personal representatives. A Grant of Probate is the name of the legal instrument that the court will issue, giving them the authority to manage the decedent’s estate.
The intestacy laws describe who may apply to administrate the decedent’s estate if they passed away without leaving a valid Will (also known as dying intestate). Priority is in the following order: spouse or civil partner who has survived, children, parents, siblings, and distant relatives.
If the deceased died intestate, the personal agents are ‘Administrators.’ The document issued by the court granting them the right to handle the deceased’s estate is known as a Grant of Letters of Administration.
A testator may appoint one or more professionals to act as their executors (alongside a family member or not) in their Will. Alternatively, personal representatives may decide to instruct a solicitor to administer an estate on their behalf.
The steps involved in estate administration will vary for each estate; however, it is likely to involve the following:
Assemble the necessary information for estate tax filing.
This entails sending letters to organizations that may have information about the deceased’s assets, including banks, building societies, accountants, financial advisors, life insurance companies, etc.
To know the amount of inheritance tax due, a personal representative must also look into any donations made for the seven years preceding the date of death. It also includes planning appraisals of goods like jewelry, a car, and other items.
Pay any owed inheritance tax.
When requesting a Grant of Probate or Letters of Administration, inheritance tax is due on all personal property (including land and buildings). Taxes are due six months following the end of the month in which the death occurred. If money is bound up in property, it is possible to arrange for inheritance tax to be paid in annual installments over ten years; however, there will also be interest.
Most assets won’t be transferred without a Grant. However, banks or building societies occasionally release the money to pay inheritance tax. It is necessary to submit the inheritance tax account before applying for the grant of probate.
Distribution of legacies and debt repayment
Before dividing the residuary estate, the following must be paid:
- Administrative and funeral expenses.
- Debts (including any inheritance tax loan).
- Specific legacies, such as jewelry, art, or automobiles.
- Legacies of money or set sums of cash left to particular beneficiaries
Any taxes on income or capital gains that the dead owed as of the date of death. This can entail making sure that any unprepared tax returns up to the day of death are prepared.
Estate administration is not easy and can be complicated, so it is best to engage a knowledgeable estate administration lawyer.