If you are dealing with the administration of the estate of someone who has died, you will have a long list of tasks to carry out. We take a look at the key jobs and the best way to approach them.
As an executor or administrator, you will be responsible for winding up the deceased’s affairs. This is often very time-consuming and you may want to consider asking a probate solicitor to take on the job if you only have limited time to devote to it yourself.
The key steps are as follows:
1. Valuing the estate and securing the deceased’s assets
The first job is to value the estate as accurately as possible. This means taking into account all of the deceased’s assets, including property, cars, savings, investments and valuable items such as furniture and cars.
Debts such as mortgages and credit cards debts also need to be valued. Once you have a figure for all of the debts, this should be deducted from the total of the assets to arrive at a value for the net estate. This will allow you to calculate whether Inheritance Tax will be payable.
You also need to take steps to protect the estate’s assets, for example, by making sure that property and cars are adequately insured.
2. Calculating and paying Inheritance Tax
You need to calculate and pay Inheritance Tax next. This is not always straightforward as there are several allowances available and part of the tax may be payable on a sliding scale if the deceased made sizeable gifts during the last seven years of their life.
The basic threshold over which the tax is payable is £325,000. It is generally payable at the rate of 40% on the portion of the estate over this threshold. If the deceased’s spouse has already died and their estate did not use all of their Inheritance Tax allowance, this can be added to the deceased’s allowance.
A property allowance also exists if a property is left to direct descendants. This is £175,000 for each spouse and again, this is transferrable between spouses if not used.
You will need to ask HM Revenue & Customs for an Inheritance Tax reference number and then pay the tax to them.
3. Applying for a Grant of Probate or a Grant of Letters of Administration
Unless the deceased’s estate is small, you will need to apply for a Grant of Probate. This is the document that gives the executors the legal authority to wind up the estate. If the deceased did not leave a Will, then the person who will take on the estate administration should apply for a Grant of Letters of Administration, which has the same function.
4. Collecting in the assets and clearing the estate’s debts
Once the Probate Registry issues the grant, copies can be sent to all of the asset holders so that accounts can be closed and money paid to the estate. All debts should be cleared. If there is a chance that some debtors have not been identified, you should place an advertisement for them in the local paper and in The Gazette.
5. Identifying beneficiaries
Similarly, you can advertise for beneficiaries to come forward if there is a risk that you have not located all of them. It is important to protect your position as far as possible, as the executors or administrators of an estate will be personally liable for any mistakes they make that cause a loss to the estate.
6. Preparing detailed estate accounts
Once the debts have been cleared and assets collected, to include selling property if necessary, estate accounts should be prepared. These need to include full details of all transactions, including income received during the estate administration period.
Residuary beneficiaries are entitled to see the estate accounts. These are the beneficiaries who are left the residue of the estate once all of the specific bequests have been made.
7. Distributing the estate and obtaining receipts
The estate can then be distributed in accordance with the deceased’s Will. If they did not leave a Will, then it will be in accordance with the Rules of Intestacy. It is important to obtain signed receipts confirming that the beneficiaries have received what is owed to them.