Insights 25.6.20 Author: Amanda Revell

Dealing with an Estate after the Death of a Loved One: A Step by Step Guide

Insights 25.06.2020 Author: Amanda Revell

Following the loss of a loved one, there can be a lot to deal with, and having to go through the administrative process too can feel quite overwhelming at such a difficult time.

If you have been appointed as the Executor in the Will (if there is one) then it becomes your responsibility to deal with both Probate and Inheritance tax (IHT) for the person who has died. If there is no Will, Intestacy Rules may apply and if you could benefit from the estate, you may be required to administer the estate under those circumstances too.

If you have never done this before, it can be quite a daunting prospect. To help you, we have set out a basic step by step guide for how a “normal” estate is administered.

Estates can become very complicated though, so before you start it is always worth speaking to someone first, even if ultimately you do decide  to do it yourself. We would be happy to speak to you about the process in more detail – please see our contact details at the end of this article.

Step by Step Guide

Step 1: Establish What Assets the Deceased Owned

To do this, you will need to gather information to ascertain what assets were held, for example bank accounts, pensions, investments and property, to name but a few. Even if you use an advisor to help you through the process, they will need your help with this.

You will also need to consider whether any of the accounts or assets were jointly owned.

Money in a joint bank account will automatically pass to the other owner(s) and does this outside of the Probate process, but please note you still have to include this money as part of the estate when you work out the IHT.

If the person who died owned a property with another person as ‘joint tenants’ the whole ownership passes to the other owner, again outside of probate, but it still needs to be counted for IHT purposes. This happens irrespective of what the Will says but note that if any jointly held property is held as “tenants in common”, the share of the person who died will pass in accordance with their Will. The land registry should show how property was held or a solicitor can help you to find out.

Step 2: Establish what Liabilities the Deceased Had

Once you have established what assets are in the estate, you also need to work out if there are any debts. These will also be considered when you work out if any IHT is due. Debts could include:

Step 3: Work out the Net Value of the Estate

The Net value of the estate will be the value of all of the assets less the value of all of the liabilities (steps 1 and 2). Once you know how much the Net Estate is worth, you will be able to decide whether you might need to pay IHT (which will also be affected by who is going to inherit, so you need to make sure you have a copy of the Will or know who is going to inherit under intestacy rules and this will determine which type of IHT form you need to submit  to HMRC.

Not all estates need to submit a full IHT return.

If you do need to submit a full IHT form and/or pay IHT, this will need to be arranged before you can obtain Probate.

Step 4: Establish What Reliefs are Available

Once you know what assets are in the Estate and who is going to inherit, you may be able to claim various reliefs to reduce the IHT that will need to be paid. This can include:

  • Business Property Relief (BPR)
  • Gifts to charities (exempt, but may also reduce the overall IHT rate payable); and
  • Gifts to a surviving spouse (exempt)

There may also be additional nil rate bands available in relation to the home or remaining from a former spouse (if the deceased was a widow or widower).

Step 5: Establish Whether Probate is Required

Again, depending on who is going to inherit and what the assets are worth, you may or may not need to obtain Probate. For example, you may not need probate if the estate only contains joint property and savings as these will automatically pass to the surviving owners.

Even if the estate is exempt from obtaining Probate under the normal rules, some banks may still ask you to obtain this before they will give you control of the account. You should contact each asset holder (for example a bank or mortgage company) to find out if you’ll need probate to get access to their assets. Every organization has its own rules and it will usually depend on the value involved.

If you need to obtain Probate, there will be certain papers that need to be completed to obtain this. You may decide to use a solicitor or other advisor to help you to do this. Only the Executor or a solicitor can obtain the final grant of probate. One document you must make sure you have is the original Will, as that will need to be submitted with the IHT and probate documentation.

Step 6: Distribution

Only once Probate has been granted and all debts and taxes have been paid can you distribute the estate as detailed in the Will.

What next?

If you would like further assistance, please contact the CBW private client team who would be happy to guide you through the process.