Registering the death
The first thing that should be done when someone dies is that their Death should be registered.
For deaths in England and Wales the death should be registered within 5 days of the death. Due to Covid 19 the appointment with the registrar will be over the telephone.
Make sure you have the following information to hand as you will be asked for the deceased full name, their maiden name where applicable, full address, date of birth, date of death, place of death, name of spouse, where applicable, along with the spouse’s occupation. You will be asked whether you were present at the death and your relationship to the deceased.
Make sure that you note the unique reference provided so that you can use the government’s helpful service known as the Tell Us Once Service, which reports the death to a number of government organisations so issues such as any overpayments in respect of state pension and/or benefits can be dealt with in due course along with other issues. Using this service will save a great deal of time spent in letter writing.
Until the death is registered the deceased cannot be a buried or cremated.
It is always sensible to purchase additional copies of the death certificates to deal with the deceased’s financial institutions in due course. In a previous news article dated 6th November 2020 headed Burial Disputes and the Law we explained who has the right to make funeral arrangements. In summary the executor has authority to deal with matters of burial. Therefore it is prudent to ensure you have the deceased’s last valid will (if there is a will) before making funeral arrangements as if you are not the executor you will ideally want the executors consent to make arrangements and there may well be a letter of wishes with the will or funeral directions contained in the Will.
If there is no will and you wish to know who is entitled to make funeral arrangements we refer you to our article Burial Disputes by clicking the link https://www.clodes-solicitors.com/burial-disputes-and-the-law/ or alternatively contact us to discuss the matter.
The benefits of an Executor instructing a Solicitor and the risks of not doing so
We believe that people should give serious consideration to instructing a solicitor to act on their behalf where they have been appointed as an executor. The starting position is that an executor should have an indemnity from the estate in respect of their legal costs. This is fine if the estate can bear the costs however if you suspect the estate is insolvent you must ensure that you are happy to potentially incur legal costs. If for any reason you do not wish to act as an executor you should not intermeddle with the estate. Intermeddling in the estate will result in an executor not being able to escape their appointment. Therefore if you have reservations about being an executor and cannot decide if you wish to proceed you should take immediate legal advice and refrain from getting involved with the estate in any way. If no executors are willing or able to apply for probate, they can complete form PA15 and send it to HMCTS Probate, PO Box 12625, Harlow CM20 9QE.
The executor’s indemnity can be lost should the executor act unreasonably or take a non-neutral position in an estate dispute and end up being a losing party. It is therefore important that you follow the advice of your chosen solicitor to protect you from potential personal liability. Appointing a Solicitor will reduce the stress of dealing with the estate and reduce the liability you will incur acting as an executor. For instance non professional executors often pay Inheritance Tax where reliefs were available, deal with debts on the estate incorrectly, deal with claims improperly and sometimes misunderstand the terms of the will or fail to appreciate a will variation might be of use to deal with a particular unintended problem.
Executors can end up personally liable for their failings and whilst a lot of errors can be resolved they are usually costly to deal with. It is far better to rely upon a professional to take the burden from you from the outset even where you believe the estate administration to be straight forward as things can change and estates can quickly become complex to deal with. Executors can renounce their executorship should they not have intermeddled with the estate, they can reserve their power and one of the other Executors can apply for Probate.
We are commonly asked whether an executor can appoint an attorney to act on their behalf, they can provided the executor has capacity and the attorney can undertake the probate application provided the application and Power are drafted correctly. The attorney can then make the application for probate and deal with all the matters the executor could have dealt with.
If it is known from the outset that the estate is insolvent or there is likely to be a claim on the estate it becomes even more important that you take legal advice before taking any steps in the administration of an estate.
Arranging the funeral
Once you are satisfied that you have authority to arrange the funeral and have made a search for a funeral policy you can take steps to arrange the funeral with an undertaker. If you know the estate is solvent or their is a policy that will pay for the funeral in the way in which the deceased wanted you are unlikely to have many issues being reimbursed for the reasonable funeral costs. Most banks and building societies will without a Grant from the Probate Registry pay the funeral costs. If the estate is not solvent more care has to be taken unless you are content to meet the costs of the funeral from your own funds. In some circumstances you maybe able to get a Funeral Expenses Payment from the government. It is also worth checking to see whether you or the dependants of the deceased are entitled to bereavement benefits.
Securing and Preserving the estate – Insurance
It is important that estate assets such as the deceased’s house contents and various assets are secure and properly insured on the correct basis. Most policies will want the property heated to a particular temperature throughout the winter months and in some cases for the water supply to be turned off and the system drained. It is often prudent to have the exterior door locks changed. We usually advise making contact with neighbours to ascertain whether they have any concerns and asking them to report any suspicious activity providing contact details.
All insurers will want to be notified of the death of the policyholder and should be asked to provide a copy of their current terms. Most insurers will expect regular inspections of the property and have other requirements that will have to be adhered to. It may be for high value items the insurer might want these taken off site and stored in some way. Whatever you intend to do it is vital that you ensure the property and contents are properly insured.
Collecting information to determine estate’s value
Once the deceased’s assets are secure you will usually need to obtain valuations in respect of any land and property owed by the deceased. This section will not provide an exhaustive list of assets and life time transactions that may need to be accounted for however it will provide a useful starting point. Executors need to make extensive searches and it would be prudent to draft an inventory of all contents and personal effects.
When we are acting as executors we usually obtain three formal date of death valuations from estate agents that are local to the property. In addition it is vital that formal valuations are obtained in respect of the deceased’s property contents and personal effects. Where items are not being specifically gifted in the Will and items need to be sold it is vital that an executor protects themselves from claims that items have been sold at undervalue. It is also important that valuations are obtained to support the figures provided in any Inheritance Tax Return. Beware collectables, artworks and antiques often require specialist independent valuations from experts competent in the relevant field. We have seen executors run into difficulties where they rely on guess work or old valuations as the markets can change quickly. An executor must always ensure they are protecting themselves and the estate.
The executor will need to obtain date of death valuations in respect of all investments held. This is usually a fairly straightforward matter of writing to a bank, building society or NSNI and providing the institution with a death certificate and asking for the date of death balance and the current balance. It is prudent to request statements where applicable for the last seven years and confirmation of what accounts the deceased held with the institution.
Shares and securities tradable on the open market should be valued on the ‘quarter up’ basis. If the deceased died on a non trading day an executor will need to look at trading prices of the previous day or next day’s trading. Once you have ascertained the highest and lowest prices at which the shares were trading on the relevant day the lowest price should be deducted from the highest price. One quarter of the difference should then be added to find the “quarter up” price.
Unit trusts, investment trusts and interests in open ended investment companies are not valued on a quarter up basis, but on the lowest price shown per unit at the date of death.
If the deceased was a beneficiary of a life interest trust the interest should be valued in most instances.
It is always prudent to check the unclaimed assets register to make sure you have located all the deceased’s assets.
For the purpose of this article we are not going to discuss partnership interests or any business /farming interests or options to purchase. However these interests must be valued in the correct way and if the executor is unclear as to how these interests are to be dealt with they ought to take legal advice from the outset. A solicitor will want to see the partnership agreement if applicable and any other relevant documentation.
The deceased’s pension providers will need to be notified of the death and should be asked whether any lump sum is payable and if so whether the sum is payable to the estate or was it written into trust or is it payable at the discretion of the pension company. The pension company should, where applicable, also be asked if any pension is to be paid to the deceased’s spouse or children. The pension company should also be asked what pension was paid to the deceased from the 6th April to the date of death and what income tax was deducted.
Life Insurance Companies
It is important that any life policy companies are asked what the policy was worth at the date of death. The sum that is to be paid out and whether the policy proceeds are written into trust and if so the names and addresses of the trustees. The death of a life assured is a chargeable event in relation to all “qualifying life assurance policies” and some “non-qualifying life insurance” If you need further information consult Part 10 of the Corporation Tax Act 2009 or contact us.
Where the deceased was employed at the time of their death it is prudent to write to the employer to ascertain whether there any moneys due to the estate and to ascertain details of the pension provider and any life assurance scheme.
Life time transfers
Any lifetime chargeable transfer into trust or gift or the gift element of a transaction at undervalue made within 7 years of the date of death may be brought back into the estate for inheritance tax purposes. Therefore discussions with the deceased’s family and close friends or partners need to be had in addition with searching bank records to ascertain whether any life time transfers or Potentially exempt transfers were made by the deceased.
An executor needs to be able to determine the estate liabilities. Perusal of the deceased’s bank statements will assist in this respect however this search will not identify all liabilities. The executor must request official copies from the Land Registry in order to obtain property valuations and the charges register should show mortgages and any other charges. The deceased’s tax returns may also assist as will searches of all paper work the deceased held. Some debts may only become apparent once the news of the death has made its way to a particular person or institution and this is one of the reasons the executor should be in no rush to distribute the estate after obtain a Grant.
Applying for Probate
Applying for the legal right to deal with someone’s property, money and possessions (their ‘estate’) when they die is called ‘applying for probate’.
In most but the smallest of estates an executor will be required to apply for a Grant or letters of administration from the relevant Probate Registry should they be entitled to do so and wish to do so .
If there is no valid will letters of administration will need to be applied for and whilst this article is written from the perspective of applying for probate when appointed as an executor the process is broadly the same up to the point of making the application, you will need to have a good understanding of the assets and liabilities of the estate before you proceed to making an application and you run similar if not greater risks to that of an executor.
Once you are satisfied that you have identified the estates assets and liabilities and are satisfied that you are aware of any and all potential Inheritance Tax reliefs you are in a position to determine whether an Inheritance Tax Return will be necessary and if so whether a Full Inheritance Tax account must be submitted to HMRC (Form IHT 400 and its schedules) or whether the estate is an excepted estate which will is a simplified account known as an IHT205 form. If you have some idea of whether a full return is likely to be necessary or simplified return is required you will be able to get a good indication of Solicitors costs for dealing with the administration of an estate. Our estimated costs can be found by clicking the link https://www.clodes-solicitors.com/estate-administration-prices/
All enquires about tax are addressed to HMRC not the Probate Registry. The majority of estates are classed as excepted estates and therefore in the majority of cases an IHT205 will be the relevant estate account form.
For an Excepted Estate what does the Probate Registry Require in order to obtain a Grant ?
The probate registry will require form PA1P completed if the deceased had a will along with a completed IHT205, the original Will & a copy, Death Certificate or interim death certificate from the coroner, the HMCTS fee currently £215 plus £1.50 per copy grant you require this can be paid for by cheque or by calling the probate registry. Take copies of everything you send, send it by recorded delivery and do not take staples out of the original Will to copy it as if it appears that it has been tampered with you may not get a Grant. Please note the application can also be made online www.apply-for-probate.service.gov.uk. There will be a requirement for all applications to be made online shortly so check before submission.
The procedure for applying for a Grant where a full account is required
If there is any Inheritance Tax to pay, you’ll need an Inheritance Tax reference number from HMRC before you are able to complete the IHT400 account and the applicable schedules. This must be applied for and once you have the reference and have completed the IHT400 you can send it to HM Revenue. The applicable address is contained on the account along with IHT421 relevant supporting documentation and a cheque for the Inheritance tax payable if applicable or confirmation of how the tax is to be paid.
Schedule 421 is stamped and returned by HMRC as soon as they agree there is no Inheritance tax due or HMRC will raise further enquiries. Once you have a stamped Form 421 the application can be made to the Probate registry in a similar manner to that of excepted estates discussed earlier.
What do you do if you note you have made a mistake on an Inheritance Tax Return or the information supplied is no longer accurate ?
You should in most cases file a corrective return.
Once the Grant is received from the Probate Registry can you distribute the estate ?
You should not rush to distribute the estate even if in theory you can. Apart from potentially having to sell property for the best price possible you may need to file income tax returns, trust returns, file business accounts amongst other returns. Once everything has been collected in and all debts ascertained you have to draft estate accounts and have them approved by the beneficiaries.
As an executor, you are responsible for dealing with any claims against the estate. After you receive a grant of representation (grant of probate), it is recommended in law (under the Trustee Act 1925 for England and Wales, the Confirmation of Executors Act 1823 for Scotland, and the Trustee Act 1958 in Northern Ireland) that you place an advertisement in The Gazette and a local newspaper to find creditors who are owed money by the estate.
No matter how much pressure beneficiaries apply do not be rushed into distribution of the estate
There is still plenty of work to do and pitfalls to be avoided from this stage of the administration. We will create a further article next week highlighting some of the common pitfalls.
Whilst this article may have raised some points to consider it should not be taken as legal advice to the reader. Every case is different and commonly people in times of stress misunderstand the points being raised or do not have enough information about the estate and beneficiaries to make firm decisions. When you are appointed as executor it makes little sense to take the risk of personal liability when you can take legal advice and have the liability and stresses involved in the administration fall on an insured experienced solicitor.
If you need help with the administration of an estate contact Damian Clode at Clodes Solicitors today on 02920 765050 or by email at firstname.lastname@example.org
We can arrange meetings via Zoom or other platforms convenient to you to discuss matters further.