Laura Cowan

This includes managing several complex tasks, including:

• Informing all organisations with which the deceased had a relationship.
• Collecting all assets – money, personal possessions, property and other assets.
• Life insurance claims.
• Paying bills and other debts.
• Managing and paying tax and completing inheritance tax and other tax returns.
• Dealing with trusts.
• Applying for a grant of representation. This is probate if there is a will and letters of administration if there is not (both referred to here as probate).
• Distributing residuary assets.

It is your legal duty to carry out the deceased’s wishes accurately. You can be personally liable if mistakes are made.

Estimate estate value for IHT purposes

Before applying for probate, you must estimate the estate’s value to ascertain whether inheritance tax (IHT) is likely to be payable.

If IHT is due, it must be paid at the end of six months from date of death and an IHT tax return must be completed – usually before probate can be applied for. This is a lengthy document requiring evidence of the deceased’s assets. If assets include property, staged payments may be accepted by HMRC until the property is sold, or it may be possible to apply for a loan to pay the IHT if there are no cash assets.

Some estates include a variety of private and business assets and liabilities, and specific skills are needed to administer these. Knowledge of measures that the deceased may have taken to mitigate their tax burden, such as trusts, lifetime gifts and other tax planning methods is crucial.

Applying for probate

Probate applications can be tricky, and the PR must be particularly confident to carry it out independently.  Typically, collating the information to be able to apply for probate takes around three months, but it can be longer if errors are encountered or additional information is required. A fee of £300 is payable when applying for probate for an estate valued over £5,000.  No fee is payable for estates less than that.

Tax issues

Income tax must be paid to HMRC where the estate continues to earn income, such as from rented out property, dividends or interest on savings.  A self-assessment must be completed if the estate is valued at over £2.5 million, or where total income tax and capital gains tax due is over £10,000, or more than £500,000 worth of assets have been sold in any single tax year during the administration period.

Capital gains tax (CGT) is payable on any profit made by the estate. Where residential property belonging to the estate is sold, any CGT due must be paid within 60 days from the date of completion.   Where a significant amount of CGT is payable or assets of a substantial value are sold, a trust and estate tax return must be completed.

Administering the estate

It is the PR’s responsibility to pay debts and liabilities, such as mortgages, loans, credit cards and other creditors. Where the estate holds limited financial resources, debts must be paid in a specific order and there are rules about how much of each debt should be paid.  This is complex and you should take advice. As a PR, you can be held personally liable for debts up to the value of the estate if they are not properly paid.  This includes when a creditor that the executor did not know about makes a claim against the estate.

Only after all this, can the residuary estate be distributed. If there is no will, the administrator must distribute any residuary estate under strict intestacy rules.

Legal, administrative and tax duties can be onerous for PRs, and it is best to get help from a professional probate lawyer.

Laura Cowan is head of Graysons’ private client department and leads an accomplished team.  She is a chartered legal executive, with around 25 years’ experience in estate administration. She is a full member of STEP (Society of Trust and Estate Practitioners) and is a member of Lifetime Lawyers (previously Solicitors for the Elderly). Contact Laura or her team now.