Probate and Estate Administration is when you hand an individual’s estate after death, but they are defined differently and often misunderstood.
‘Probate’ is a widely used term, but there is confusion about what it means and what is included in the probate process. For example, ‘Estate administration’ is much less commonly known and referred to, even though the term more accurately describes the process of dealing with a deceased person’s estate.
What is probate?
Probate refers to obtaining the ‘Grant of Probate – or ‘Letters of Administration if there is no Will – which is required by law when the deceased owns property or if a financial institution requires a ‘Grant of Probate to release funds.
Probate is not required if the estate is less than £5,000 in value or if the assets were held jointly, so it will pass automatically to a surviving joint owner (though there may still be inheritance tax implications in some circumstances).
If probate is required, the ‘Grant of Probate must be obtained before an Executor (if there’s a Will) or an Administrator (if there’s no Will) can start to gather in the assets associated with an estate.
When probate is required and a Will is in existence, five different stages need to be followed before estate administration can begin:
- Obtaining the Will which appoints the Executor
- Assessing the estate, including:
- Valuing property, savings, investments, and any other assets
- Calculating debts and liabilities
- Assessing the details of accounts, including stocks and shares
- Valuing any other significant items
This assessment must be conducted based on ‘the date of death, meaning it must be the value of the assets at the date of death or the outstanding debt value at the time of death.
- Completing the probate application and submitting Inheritance Tax forms to HMRC if necessary
- Sending all details of the application, including the death certificate, to the Probate Registry
- Swearing an oath and receiving the “Grant of Probate” or “Letters of Administration.”
What is Estate Administration?
Estate Administration is the process of dealing with a person’s legal and tax affairs after their passing. This involves dealing with the deceased’s financial assets, property, and personal belongings, in addition to their debts, pensions and Inheritance Tax.
It can sometimes be extremely complex depending on the size of the estate, the type of assets, and the wishes left in the Will.
Surprisingly, ~60% of the UK population doesn’t have a valid Will. If there’s no Will, the assets will be apportioned according to the Government’s ‘Rules of Intestacy’ rather than the family’s wishes. This is likely to complicate the estate administration process.
Estate Administration could involve:
- Applying for ‘Probate’ – which is sometimes mistaken for the entire estate administration process, whereas it’s only a small part of what’s involved.
- Completing all Inheritance Tax forms for HMRC.
- Income Tax work for the year of death.
- Valuing assets like a house.
- Property valuation and sale.
- Specialist building insurance.
- Setting up Trusts in a Will.
- Postal redirection.
- Registering unregistered properties.
- Arranging for a pet to be re-homed.
- Cancelling or transferring utilities.
- Settling all liabilities.
- Distributing funds to beneficiaries.
- Producing estate accounts.
