The probate process in England and Wales is a legal procedure that ensures the proper distribution of a deceased person's estate. Navigating this process can be complex, so understanding when probate is needed, the types of grants required, and the steps involved based on whether the estate is liable to pay Inheritance Tax (IHT) or not can be incredibly helpful.
When is Probate Needed?
Probate is typically required when:
The Deceased Owned Property: If the deceased person owned property, whether it's a house or land, probate is usually necessary to transfer ownership or to sell the property.
Significant Assets: When there are significant assets (e.g., bank accounts, investments) that are solely in the deceased's name, institutions often require a grant of probate to release these assets.
Financial Institutions Request It: Banks and other financial institutions often ask for a grant of probate before they will release funds, especially if the amount is substantial.
However, probate may not be needed if:
The estate is small, typically under £5,000 - £10,000, but this threshold can vary by financial institution.
The assets were jointly owned; they usually pass automatically to the surviving co-owner.
The deceased had no property, land, or significant assets.
Regardless of whether or not probate is needed, the estate will always need to be administered and the deceased's affairs finalised. This would include matters such as dealing with Landlords, finalising any entitlement to state benefits, distributing belongings and possessions, arranging and paying for the funeral, as well as dealing with any income tax affairs.
Types of Grants Required
Depending on whether there is a will and the specifics of the estate, different types of grants may be required, the main ones are:
Grant of Probate: This is needed if the deceased left a will. It confirms the executor's legal authority to manage and distribute the estate.
Letters of Administration: If there is no will, this grant is necessary. It gives the administrator (i.e. next of kin) the legal authority to manage the estate.
Letters of Administration with Will Annexed: This is required when there is a will, but no executor is named or able to act.
The Probate Process
The probate process varies depending on whether the estate is excepted or taxable:
Excepted Estate
An expected estate is one where the total value is below the Inheritance Tax (IHT) threshold, which is currently £325,000 (as of 2024). In some circumstances, an estate may not be classed as an excepted estate and a full Inheritance Tax account will need to be submitted, even if there is no Inheritance Tax to pay. By way of some examples, this is generally where:
There have been gifts of more than £250,000 in the last seven years prior to death
There have been gifts made by the deceased, but they retained a benefit, for example they gifted their home to their children but continued living there.
An estate with a value of more than £3m.
Anyone who is deemed domiciled in UK
Where the estate has foreign assets in excess of £100,000
Steps for an Excepted Estate:
Valuing the Estate: Assess the total value of the deceased's assets, including property, savings, and personal belongings as well as debts and money they owed.
Application for Probate: Complete a probate application form (PA1P if there is a will, PA1A if there isn't). Or in some cases make an application online.
Submit Application: Send the forms, along with the original will and the death certificate to the Probate Registry.
Pay Probate Fee: A fee is payable for the probate application, which is generally £300.
Receive Grant of Probate: Once the application is processed, the grant of probate will be issued.
Administer the Estate: Use the grant to collect the deceased's assets, pay any debts, and distribute the remainder according to the will or intestacy rules to the beneficiaries. You will also need to consider other tax matters, such as Income Tax and Capital Gains Tax, as well as preparing detailed Estate Accounts for the beneficiaries.
Taxable Estate
A taxable estate exceeds the IHT threshold when taking into account the value of the assets as well as the use of any exemptions or reliefs or involves complex tax affairs.
Steps for a Taxable Estate:
Valuing the Estate: As with an excepted estate, assess the total value, but this often requires a more detailed valuation for IHT purposes.
Inheritance Tax Forms: Complete the appropriate IHT forms (IHT400 and associated schedules) and send these to HMRC with supporting evidence and documents.
Paying Inheritance Tax: The IHT must be paid before applying for probate. This is often done using funds from the deceased’s bank accounts or an instalment option might be available in certain circumstances.
Application for Probate: As with an excepted estate, but awaiting the code from HMRC in order to apply.
Submit Application: Send the completed forms, the will, death certificate, and proof of IHT payment to the Probate Registry.
Pay Probate Fee: As with excepted estates.
Receive Grant of Probate: Upon processing, the grant will be issued.
Administer the Estate: As with excepted estates, however, you will need to obtain HMRC clearance to ensure all tax is paid since assets values might change during the administration period, which could impact the IHT position. Such as investments or property sold for more or less than the date of death value.
How long does Probate Take?
Don't be disillusioned that this will be a quick and painless job. Probate and indeed estate administration can take many months, if not years to complete. The probate application itself will take between 3 - 6 months, if not longer in more complex situations.
Conclusion
Navigating the probate process can be daunting, but understanding the key steps and requirements can help ease the burden. Whether dealing with an expected or taxable estate, ensuring accurate valuations, timely applications, and correct form submissions are crucial. When in doubt, seeking advice from a probate specialist such as Toucan Law can provide valuable guidance and ensure compliance with all legal requirements.
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