As attributed to Benjamin Franklin, there are only two things that are certain in life – Death and Taxes. Inheritance tax covers both issues at the same time. As usual in tax, it is not straightforward. The main point to note at this stage is that ‘probate’ is not always the most appropriate term.
The Starting Point, or Rather the End Point; Death
When a person dies, the person or persons who are to administer their estate are known as personal representatives. There are two types of personal representatives:
- An ‘executor’ who is appointed in the will, or
- An ‘administrator’ where there is no executor named in the will (or willing to act) or if there is no will.
For this article, I will only refer to executors, as that is the term we typically think of when administering an estate.
Grant of Representation
A grant of representation is an order of the High Court giving one or more persons the legal authority to administer the estate of the deceased and distribute it correctly to the beneficiaries. On death, the executor will apply for a grant of representation to administer the estate. In practice, this is done by completing an online application and sending it to the Probate Registry.
The ‘grant’ gives the executor the authority to deal with the deceased’s estate and also establishes the validity of the will or that the deceased died without making a will. The people named on the Grant of Representation are legally responsible for, and ultimately liable for, the administration of the estate. The decision about who is named on the grant is a very important one because it carries this responsibility. The executors may appoint an authorised person to do this on their behalf.
Different Types of Grant of Representation
There are three types of grant of representation:
- A grant of probate – where there’s a valid will appointing executors who are willing to act
- A grant of letters of administration with will annexed – the deceased left a valid will, but it is defective because, for example, the executors do not wish to act
- A grant of letters of administration (grant of simple administration) – where there is no will
For this article, we will refer to all three as ‘probate’.
At What Stage Do You Apply for Probate?
If Inheritance tax is due or if HMRC requires an inheritance tax account, you can only apply for probate once forms IHT400 and accompanying schedules have been submitted to HMRC, any inheritance tax has been paid, and HMRC issues an IHT reference. If there is no inheritance tax due and HMRC does not require an inheritance tax account, you can apply for probate straight away.
When Don’t You Need to Apply for Probate?
Probate is needed for nearly all estates, but there are exceptions. For example:
- The estate doesn’t include land, property, or shares
- All assets were held jointly and passed to the survivor
- Bank/building society accounts with less than £5,000 in each account
Why is Probate Needed?
Probate is only needed to deal with property that passes to the executors, for which they require proof of their legal title.
When Is Probate Not Needed?
Probate is not needed when the estate contains assets for which there is no legal title, such as cars, phones, antiques, etc. The executor does not require a probate to deal with them. Additionally, a probate is not needed where certain assets are not handled by the executor and are excluded from the grant. For example, life insurance and pension policies where a nomination form has been completed, and assets held jointly as joint tenants. This does not apply to assets held as tenants in common. (When two people own an asset, they can either own it as joint tenants or tenants in common. With joint tenants, the asset transfers sideways to the co-owner. With tenants in common, the asset may be bequeathed to any other person, such as a child.)
If You Do One Thing After Reading This Article…
Please review your jointly owned assets and seek legal advice on whether they should be held as joint tenants or tenants in common. There is also a second action point: make sure you have an up-to-date will!
Alun Evans is licensed to carry out the reserved legal activity of non-contentious probate in England and Wales by the Institute of Chartered Accountants in England and Wales. Details of our probate accreditation can be viewed at icaew.com/probate under reference number C002172501. If you require further information on probate, please get in touch with Alun Evans at 01437 760666 or via email at alun.evans@bevanbuckland.co.uk.
