Hot Topics – Our Top Tips on Probate…

Our long-standing history of looking after client’s financial affairs was the key motivation behind the development of our ‘Wills and Probate’ service, which is designed to provide our clients with the security and confidence that their estate will be dealt with professionally and with as little upheaval as possible. From a cost perspective, depending on your Financial Planning proposition with us, this service might be complimentary to you, however in any regard you are likely to find substantial savings versus engaging a local solicitor.

In a few weeks’ time, we will launch our iSecure App, designed to provide clients with a virtual filing cabinet to keep all manner of items secure and accessible, moreover linking to an executor who would have access to the detail following death.

The support we can provide in this area of advice is not simply limited to how best to manage your income and capital needs whilst being inheritance tax efficient, it extends to helping to manage your estate planning and wealth transfer into your beneficiaries. In this regard, we thought we’d share our top tips around probate.

Keep your executors in the picture…

If you name a friend or relative as an executor, speak to them about your financial affairs, letting them know where key documents can be found and at the very least making sure they have a copy of your Will for when the time comes!

As your executor, they must apply for a grant of probate to get the authority to locate and value your assets. This includes your bank accounts, pensions and investments, home and its contents, any insurance pay-outs plus any outstanding debts. An asset register helps a lot here, including details of gifts and any debts, as these are considered when calculating the value of the estate.

If there are gifts that you want to deduct from the estate value, you need to evidence the gift and date made, so copies of bank statements detailing the date of gifts is important. We keep an asset register for all our clients to prove the date of the gift – please note that 7 years are needed for a gift to be potentially exempt from any tax liability on death.

Without a grant of probate, an executor cannot pass on assets to the beneficiaries; properties and other assets cannot be sold, and debts cannot be settled, so this information is really important.

If you’re an executor, don’t do a half job… 

Executors are responsible for getting assets valued and distributed to the correct beneficiaries. Each step should be recorded to show that the executor has acted properly and honestly; this also provides evidence to HMRC that the correct amount of inheritance tax has been paid.

Probate can be needed even if the assets are worth less than £10,000 — it all depends on where the money is held. National Savings and Investments can require an executor to obtain probate when only £5,000 is involved; at Nationwide, Lloyds TSB, Halifax, Santander and Bank of Scotland the figure is £50,000.

If all the assets in the estate are jointly owned, these will automatically pass to the surviving co-owner (usually a spouse or civil partner). If there is no Will, the executor must distribute according to the intestacy rules and will need to apply for a “grant of letters of administration” before doing so. Having a Will is so important!

Be prepared for delays

Provided there are no complications, it usually takes between four and eight weeks to receive a grant of probate after you have submitted the application, but without the right information it can take between 6 and 12 months!

A tip on death certificates

Use the government’s ‘Tell Us Once’ service. This allows you to tell all government departments of the death with one call or email. To apply, you will need the deceased person’s date of birth, national insurance number, driving licence number and passport number. The service should then notify HMRC, the Department of Work and Pensions, the Passport Office and the DVLA.

Inheritance tax deadlines

The deadline for any payment of inheritance tax is six months from the end of the month of death — so, for somebody who died in June 2020 the deadline to pay the tax would be December 30^th 2020. After this date, interest at 2.6% is charged which can quickly mount up, especially on large estates! The deadline for submission of the inheritance tax return is 12 months from the end of the month of death with a penalty of £100 for late submission.

Negotiate legal costs

Our experience shows that if you appoint a solicitor, their typical fees average at 2.5% of the estates value – often significantly more for larger estates. We would absolutely recommend looking for an agreed fee structure in advance.

In terms of probate itself, there are fixed fees on application of £215 if the value of the estate is £5,000 or over. This is reduced to £155 if you use a solicitor, however this is when the legal costs kick in, so you should ensure you are comfortable with these first.

Falls in Value

If, for example, the house value you may have entered on the probate form is not materialised on sale, you have up to a year after the death to substitute the lower sale value, and potentially claim an IHT rebate.

More than 1,850 families reclaimed overpaid inheritance tax because of falling share values in the 2019/20 tax year — more than double the number who did so in 2017/18.

Protecting the estate after death

Executors are responsible for the assets of an estate including any residential property. Most find that they have to take out empty buildings insurance if the home is vacant for 30 days or more before it is sold. Any valuable assets need to be removed and the property needs to be maintained so that it is not obvious that it is empty.

When monies are realised from the estate, be aware that although the Financial Services Compensation Scheme usually has a limit of £85,000, the money from a deceased person’s estate is covered up to £1m for up to six months. The protection begins from the date the high balance is credited to a depositor’s account or a client account held on an individual’s behalf.

This may seem like a complicated area, but it isn’t with the right help and support, which is what our business is all about. The majority of the stresses can be navigated through good organisation, so if you’d like to know more, please enquire about our iSecure document portal, as it’s part of our service to you and our team are happy to help. As ever, our services are evolving, and if you would like more information on the detail in this blog, please feel free to contact us via the usual numbers or email us at questions@dbwood.co.uk