What is Probate?
What is Probate?
The legal framework that is used to handle property, possessions and finances is called Probate and can be a complicated, long winded and frustrating process. How does the Probate process work? Most people will have made a Will or need to create a Will – a legal document setting out the person or persons who are tasked with executing the deceased’s wishes for the administration of their Estate. If there is no Will then an Executor is usually appointed by the court.
How does Probate work?
The Executor must take into account not only where money and other properties are to be allocated according to the terms of the Will but handle issues like outstanding debts, which have to be redressed along with inheritance tax that needs to be paid. The execution of a Will can take some months and even years to carry out depending on the assets and who they are to be given to. For example, if most of the value of the Estate is tied up in property or possessions, these will often need to be sold off before any inheritance can be distributed.
The steps Probate includes
- First of all, determining if a Will was made. If not, the court needs to appoint an administrator.
- Identifying all the deceased’s assets and, just as important, any liabilities such as outstanding debts that need to be paid.
- Apply for a Grant of Representation either by completing the appropriate form or going through a Probate solicitor. This basically gives you the legal authority to handle the Estate and dispose of it. Whether a Grant of Representation is needed will depend on whether assets are held in banks or building societies and what their levels of access are. It will also depend on whether the deceased has property that needs to be disposed of.
- You will need to pay any inheritance tax due on the Estate, payable to HMRC.
- Once the Grant of Representation has been given, the Executor then has the responsibility of liquidating the Estate, paying outstanding debts and distributing those assets as per the conditions of the Will. That includes any further payment such as income tax and capital gains tax that may be due to the HMRC.
- There should be a process in place of documenting all transactions and proving that the Estate has been settled according to the law and the wishes of the deceased’s Will.
- If there have been no challenges to the content of the Will, assets can then be distributed to the various beneficiaries.
For complicated settlements, it’s always best to use the services of a Probate lawyer who will be able to ensure that important aspects such as tax payments are made and the right documentation is completed.
When someone dies, does their Estate have to go through Probate?
It all depends on the size and nature of the Estate. If the deceased held little in the way of assets, then there is no need for Probate. If they owned property, including buildings, land and houses, then you will definitely need to go through Probate. If they had money in bank accounts or other financial institutions, then you will need to check with each of these to find what the level is before they ask for Grant of Representation.
How to deal with Probate if there is no Will
Generally, Probate is fairly straight forward, if drawn out, when there is a Will, assuming there are no objections to it. Things get a little more complicated when there is no Will and the person dies with an Estate. This means that the law must deliver a legal decision on who should receive the assets left by the deceased. This can cause major issues particularly if you are living as a partner of an individual who dies but have no legal status such as being married or in a civil partnership.
An application to court has to be made before the Estate of the deceased can be administered. This is done according the Rules of Intestacy. This is a complex area of law and needs the help of a Probate lawyer – getting things wrong can make you liable for covering costs and losses that are considered to have occurred because of a breach of duty, however innocent.
Who handles Probate?
If a Will is made, then the person handling the Estate in accordance with the deceased’s wishes is called the Executor. If no Will has been made, then this person is called the administrator and is appointed by the court. Both are noted as personal representatives who have the legal right to administer the Estate. Most Executors will employ the services of a Probate lawyer to handle issues such as applying for the Grant of Representation.
Probate and Inheritance tax
One of the key responsibilities in Probate cases is to make sure that all inheritance tax is paid where it is due. In England and Wales, the threshold for paying inheritance tax is £325,000. There is no tax due if you leave everything to your spouse or civil partner or a charity or community amateur sports club if it below this value.
The rate for assets over £325,000 is 40%. This can be reduced to 36% if you leave more than 10% of your assets to charity. Inheritance tax can be quite complicated and getting the right advice on what is actually due is important if you want to get it right and not pay more than the Estate owes.
How can I plan to avoid Probate?
For large Estates, Probate can be a long, drawn out process and can often take as much as year to resolve. There are a number of ways to manage your Estate to either reduce the need for Probate or, in some cases, avoid it all together. This can include giving assets away prior to your death, setting up trusts that allow designated trustees to act without Probate and according to your wishes, and putting assets in joint ownership.
Getting the right advice on how to organise your assets can make a big difference to the amount of Probate work that needs to be done after you pass away. It’s a good idea to consult with legal specialists who can advise you on this and help you set up the necessary plans that ensure your assets are distributed more quickly. Creating a Lexikin account is the ideal way of ensuring a smooth process for your family should anything happen to you.
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