Death is not the end as far as the law is concerned. When someone dies their assets including property, money and other possessions, known as their estate, need to be dealt with. This involves a process called probate. Once granted assets from the estate, including property, can be passed on, sold or otherwise disposed of.
Probate isn’t an automatic process. It needs to be applied for and who does this depends on whether there is a will. If the deceased left a Will then details of up to four executors will be included. The executors carry out the instructions in the Will and one of them will undertake to apply for probate.
If the person died intestate that is without making their last wishes known via a Will then administrators will need to be appointed and apply for probate. These administrators must be connected to the deceased and be their spouse, civil partner or child.
But let’s step back a stage. Before you begin applying for probate the value of the estate needs to be estimated. Include unpaid bills, any monies paid on death, assets such as investments and possessions including houses and cars. You’ll need to estimate the price of these in order to come up with a figure for the total value of the estate. Although you can estimate the value of a property yourself it’s worth getting it in writing from an estate agent. This will be useful if HMRC thinks at a later point that you have undervalued the property.
If it’s looking to be less than £10,000 and consists only of saving or premium bonds then it might not be required. Likewise, if there are only jointly owned properties, shares and money probate will not be required.
However, if one or more properties are included in the estate there is a very good chance that probate will be required particularly if the will has multiple beneficiaries.
In order to apply, you’ll need a copy of the original Will. You can apply online or by post and can appoint a solicitor to make the application on your behalf. Be aware that there is a cost to apply for probate and you may have to pay some inheritance tax upfront.
Once a ‘grant of probate’ or ‘letters of administration’ has been given then carrying out the instructions in the Will and dispersing specific assets including property can take place. These are usually issued in 4-8 weeks and allow you to move on with things like property sales.
There are plenty of misconceptions regards inheritance. Misunderstandings about who will inherit are common and can make the job of executor or administrator a challenge.
Spouses and civil partners automatically inherit joint assets, such as property. And these are not taxed. So if an estate was made up entirely of these then there would be no need to apply for probate or pay any tax. But this only applies to formalised relationships a partner who has not entered into a marriage or a civil partnership will not inherit unless it is included in the Will.
And additionally, your Will becomes invalid when you marry but not when you divorce. So if you’ve had changes in your personal relationships your Will needs to be kept up to date.
Another common belief is that you can’t be an executor if you are also a beneficiary. This is entirely untrue but you can step down from your duties or defer them.
If there is a Will then it acts as a guide saying who will deal with the estate and what dispersals to make. If there is no Will then it will up to the law to decide how the estate is divided.
If there is a living husband, wife or civil partner these would the first in line to inherit if the estate. However, if there are surviving children or grandchildren and the estate was worth over £270,000 then things become a little less straightforward with the estate being split. And do note that stepchildren and foster children are not recognised for inheritance.
If there is no spouse or civil partner then the estate is divided between the children. Should the deceased have no issue then their parents stand to inherit. Failing that the beneficiaries would be siblings, grandparents or aunts and uncles. Only if no relatives can be located will the entire estate go to the Crown.
This is a good reason to ensure that you make a will. It means that you get to decide who deals with your estate and can ensure your property goes exactly where you want it to. Making a Will is a straightforward activity when you have a solicitor to guide you through and the process is outlined on our How to make a Will page.
In most cases, the beneficiary won’t pay tax on an inheritance but they may be subject to other taxes at a later point as a result of the inheritance. For example, if you receive income from a trust as a result of inheritance you will pay tax on this income.
Additionally, you may be subject to Capital Gains Tax if you sell shares or property that have risen in price since you inherited them. If you own more than one property then it is necessary to designate one as your main home. You would not pay Capital Gains Tax on this one but would on any others including those you have inherited.
A house or other property forming part of the estate may actually reduce your inheritance. Rising property prices have made the inclusion of a house a major aspect of estate value and this can push things over the permitted limit for Inheritance Tax. The threshold for Inheritance Tax, paid at 40%, currently stands at £325,000 and has not changed for some years.
Property prices have continued to rise over the last few years bringing the average price of property closer to the threshold and in some areas over it. In the South East and London, for example, Land Registry data shows that the average property price in the UK in June 2020 was £237,834. However, in London, the average price is £490,495 which definitely takes things into the Inheritance Tax territory and ultimately stands to reduce the final value for the inheritance.
Additionally, in the year to June 2020 house prices in London rose by 4.2% and in the South East by 2.1%. This continual increase in property prices means that inheritance tax grows more likely as does Capital Gains Tax for any property that is not sold on quickly.
As an executor or administrator of an estate, you’ll probably want some help. Gov.uk has some excellent guides explaining the process as well as a guide to who will inherit if there is no Will. However, unless the estate is very straightforward it’s worth working with a solicitor who will be more familiar with the in and outs of the law. For example, an estate may raise complications if there are concerns over the validity of the Will, it contains a property that is still earning taxable funds or is a complicated estate which has no Will.
Start by considering the solicitor who drew up the will. If the estate is a complicated one they will have some familiarity with the issues. If they are not available then you can find a probate solicitor via the Law Society or consider speaking to one of our experts in this area.
Think about what you want from your solicitor. For example are you comfortable with lots of legal jargon? We prefer to use plainer language so that everyone involved can follow the proceeding.
Discuss how you will work together and communicate. Will you receive documents via email or will they be sent by post? Will any meetings need to be in person or can they take place via telephone or video?
Also give a thought to fees, how they will be calculated and how often you’ll be updated on your current bill. You might also ask about whether there will be any additional charges. For example, a property may incur Land Registry fees and you want to know if these have been included in your original quote.
Owning property is a wonderful thing so get it right and make preparations for when it will pass to someone else. Make a Will and talk to your executors about your wishes. If you’re an executor or an administrator be aware of the impact property has on an estate and inheritances.
Wills and probate are an exceptionally delicate matter, often arising at a very sensitive time. Whether you are handling the consequences of probate following the death of a loved one, or you are a beneficiary in a will that involves probate, the team at Romain Coleman is here to help.
Call us now on 0208 520 4555 or fill out our Online Form.
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This post is not legal advice and should not replace professional advice tailored to your specific circumstances. It is intended to provide information of general interest about current legal issues.