What is Probate & how does it work?
What is probate?
When someone passes away, they leave behind everything they owned at the time of their death such as money, property and sentimental items. These are called assets; these assets need to be dealt with in respect of the deceased person’s last wishes set out in their Will. This is referred to as the administration of an estate.
Probate (also known as a “grant of representation”) in England and Wales is a legal process that firstly requires the Will to be proven as a genuine and valid piece of documentation by the Probate Registry Office. This provides permission to the executors and trustees to commence with their duties. Probate also involves the administration of the deceased’s Estate. Executors and trustees are the appointed person/s who has the responsibility of administrating the estate in accordance with legal requirements. However the appointed executors are not required to act if they are unwilling to.
How does probate work?
Probate administration starts the day after someone passes away. The first most vital part of the process is to locate the deceased’s will. Most people usually keep their wills at home or with a solicitor. The will points out who the executors are as well other important information such as the deceased’s last wishes. If no will exists, then the rules of intestacy would apply; meaning that by rules set out in section 46 of the Administration of Estates Act 1925, the government will decide how to distribute the estate. When you make a will, it would be advisable to inform your Executor/s of its location.
Next step, the executor will need to apply for permission known as a Grant of probate from either from a solicitor or the local Probate Registry Office. There are 30 Probate Registry Office’s in the UK.
Without the Grant of Probate, administration of the estate cannot be processed. Applying for probate involves completing a probate application form and an Inheritance Tax form. However a Grant of probate is not always required if the value of the estate is worth less than £5,000 or held jointly with another person.
In a scenario where there is no Will and the deceased estate is intestate, the person applying would be called an administrator and would apply for letters of administration rather than a grant of probate.
Before the Grant of Probate can be issued, the executors are required to calculate a figure of the entire estate’s worth, this is essential for working out if Inheritance Tax is owed. Inheritance Tax needs to be accurate and paid to the HMRC.
The current standard rate of Inheritance Tax for one person is 40% but this only applies to the value of the estate that is over the Nil-rate band threshold which is currently at £325,000.
Once the executors have a figure, they would need to send the all relevant probate forms to the local probate registry. After receiving the documentation, the Probate Registry Office will send a letter stating whether the grant has been approved for probate or not. They will also issue the executors an “oath” this is usually done at the local Probate Registry Office. They also send details of how to organise an interview at their office to have the oath completed.
After the grant has been issued, executors should then distribute copies of the grant amongst the companies and/or organisations that hold the deceased’s financial assets. Once all assets are collected and secured, the executor will have a legal obligation to pay any outstanding debts owned by the deceased such as utility bills, mortgage and solicitors fees. It is of vital importance that this must be completed before the residue of the estate can be distributed. Failure to do so could result in the executor being held liable for any remaining debts.
In the final phase of probate administration, the executor has to arrange the estate accounts listing all payments coming in and going out of the estate resulting in a final figure being produced. This is referred to as the residue of the estate. The residue is paid to the beneficiaries according to their shares stated on the deceased’s will.
For more information on Probate and for professional advice, get in touch with Redstone Wills today.