This is the first part of our ‘understanding probate and estate administration’ series. If you are looking for the second blog, you can read it here.
Both probate and estate administration are associated with handling an individual’s estate after they’ve died but they are defined differently and often misunderstood. When it comes to probate, it’s a widely used term but there’s a lot of confusion about what it means and what is included in the probate process. On the other hand, estate administration is much less commonly known and referred to, even though the term more accurately describes the process of dealing with a deceased person’s estate.
Do you know the difference between probate and estate administration? If you don’t, this blog post will help you understand so you’ll be confident in offering your clients advice when they have questions surrounding what to do when someone dies.
What is probate?
Probate actually just refers to the 'Grant of Probate', also known as 'Confirmation' in Scotland, which is required by law when the deceased owns property (including any houses, buildings or land) or if a financial institution (such as a bank) requires a 'Grant of Probate' to release funds. However, probate is not required if the estate is less than £5,000 in value or if the assets were held jointly so will pass to a surviving spouse or partner. It’s important to remember that if probate is required, the 'Grant of Probate' must be obtained before an Executor (if there is a Will) or an Administrator (if there is no Will) can start to gather in the assets associated with an estate.
Keep in mind that the 'Grant of Probate' is sometimes referred to as the 'Grant of Representation' or 'Letters of Administration'.
When probate is required and a Will has been left, there are 5 different stages that need to be followed before estate administration can begin:
1. Obtaining the Will which appoints the Executor.
2. Assessing the estate including:
- Valuing property, savings, investments and any other assets
- Calculating debts and liabilities
- Assessing the details of accounts including stocks and shares
- Valuing any other significant items
This assessment must be carried out based on the date of death. For example, it must be the value of the assets at the date of death or the outstanding debt value at the time of death.
3. Completing the probate application, known as PA1 in England or C1/C5 in Scotland, and submitting Inheritance Tax forms to HMRC if necessary.
4. Sending all details of the application including death certificate to the Probate Registry.
5. Swearing an oath and receiving the “Grant of Probate” or "Letters of Administration".
What is estate administration?
Estate administration is the process of dealing with a person’s legal and tax affairs after they’ve died. This includes everything from bank accounts, belongings and property to debts, pensions and Inheritance Tax. It can sometimes be extremely complex depending on the estate and the wishes left in the Will.
Surprisingly, approximately 60% of the UK population do not have a valid Will. If there’s no Will, it’s classed as an intestate estate and the assets will be distributed in line with the rules of intestacy, rather than the family wishes. If this is the case, it’s likely to make the estate administration process more complicated.
So what could be involved in estate administration?
- Completing all Inheritance Tax forms
- Applying for probate or confirmation – Probate is often mistaken for the entire estate administration process, whereas it’s only a small part of what’s involved.
- Income Tax work for the year of death
- Valuing assets
- Property valuation and sale
- Specialist building insurance
- Setting up Trusts in a Will
- Postal redirection
- Registering unregistered properties
- Arranging for a pet to be re-homed
- Cancelling or transferring utilities
- Settling all liabilities
- Distributing funds to beneficiaries
- Producing estate accounts
At Kings Court Trust, we offer all of the services listed above as part of our fixed fee price. Although, you may find that other estate administrator providers only provide assistance in some of these areas so it's important to be clear on what's included.
Now that you have finished reading part one, take a look at part two to learn about the options that are available to an Executor or Administrator when dealing with an estate.
If you or your clients have any questions about applying for the “Grant of Probate” or the estate administration process, call our Bereavement Support Team on 0300 303 9000 for free guidance and advice.