In our guide to probate we have explained the roles of an Executor, if there is a Will, and an Administrator, if the deceased did not make a Will. The following information applies to Executors and, in most parts, to Administrators.
The role of an Executor is both a privilege and, at times, an onerous task. At Bates we are able to advise Executors throughout the process and help with as little or as much as needed, such as handling all aspects of the administration of the estate from beginning to end or just dealing with the application for a Grant of Probate and the preparation of the necessary Inheritance Tax form.
An Executor must:
• identify and protect the assets of the deceased
• settle the debts and tax liabilities of the estate
• deal with the distribution of the estate in accordance with the terms of the Will
Failure to comply with your obligations can make an Executor personally liable. Any expectations on the part of the beneficiaries of the estate that are not managed properly by the Executor can cause unnecessary stress.
• An Executor may need to register the death of the deceased with the Registrar of Births, Deaths and Marriages if there are no relatives willing or able to do this
• Technically, it is the duty of an Executor to arrange the funeral, if close relatives are unable to do this or there is disagreement between relatives about the most appropriate arrangements
• If the deceased left instructions concerning the use of their body for medical research an Executor must contact the appropriate authorities without delay
• As soon as possible after the death, steps should be taken to ensure that the deceased’s assets are protected and insured
• Full details of the deceased’s assets and debts must be established. Banks statements must be checked to identify standing orders and direct debits made and sources of income such as pensions and dividend income from shares. These days many bank accounts are managed online and there may not be any paperwork to immediately identify such assets
• All necessary financial organisations should be contacted to register the death and obtain valuations
• Utility companies and creditors should be contacted as there will be some delay in settling accounts and the Executor needs details of any liabilities due at the date of death
• Special Inheritance Tax (IHT) rules apply if the deceased was a widow or widower and they inherited some or all of their late spouse’s estate. An Executor should not miss the opportunity to claim the IHT allowances available to the estate
• An Executor has the authority to deal with the deceased’s personal belongings, car etc before a Grant of Probate is obtained but appropriate valuations must be obtained before any items are distributed
• Most assets held in the joint names of the deceased and someone else pass automatically by survivorship but an Executor needs to obtain details of the value of such assets as at the date of death, even though the asset does not pass to the beneficiaries named in the Will
• The appropriate IHT form must be completed by the Executor to report the estate assets and liabilities to H M Revenue and Customs. It is important to use the correct form and provide accurate information, especially if IHT is payable. Professional valuations of certain assets such as personal belongings, property and company shares need to be obtained
• If IHT is payable on the value of the estate interest becomes payable on any IHT that is not paid after six months from the month in which the death occurred have passed
• If IHT is payable and the correct IHT form is not sent to H M Revenue and Customs within 12 months of the date of death a penalty may be charged for late delivery of the form
• Any IHT payable can usually be paid before the Grant of Probate is obtained from bank or building society accounts in the deceased’s name and, occasionally, from share portfolios. If there are no such assets available, an Executor may have to obtain a bank loan to pay the IHT. The loan can be repaid from estate assets when they have been sold. IHT due on property and some private company shares can be paid by annual instalments, although interest will be charged after six months from the month in which the death occurred have passed
• If no IHT is payable, the Grant of Probate is usually obtained within four weeks of making the application. This process takes longer if IHT has to be paid before the application for the Grant of Probate is made
• It is advisable for an Executor to arrange Notices in the London Gazette and a local newspaper, if property is owned, in accordance with Section 27 of the Trustee Act 1925 to advertise for creditors and anyone with a potential claim on the estate
• An Executor should ensure that, after collecting in estate funds, all liabilities and tax due have been paid before the estate is distributed. If there are matters that hold up the completion of the administration of an estate it is possible for an Executor to make interim payments to beneficiaries provided sufficient funds are retained to settle any further expenses that are expected
• Detailed Estate Accounts are prepared by the Executor to provide information to beneficiaries about the estate administration prior to making final distributions
• The Inheritance (Provision for Family and Dependents) Act 1975 enables certain relatives or individuals who were financially dependent on the deceased to claim against the estate if the deceased failed to make reasonable financial provision for them. Such claims (unless the Court agrees) must be made within six months of the date on which the Grant of Probate is obtained. If such a claim is likely an Executor would be ill advised to distribute the estate until the six month period has elapsed
It is the duty of an Executor to pay any IHT that is due as a result of the deceased’s death. IHT is calculated on:
• The value of the deceased’s assets, taking into account any liabilities that were due at the date of death eg. mortgage on property
• The value of gifts made by the deceased in the last seven years to the extent that they exceed the allowances available
• The value of any gift made since 17 March 1986 where the deceased continued to benefit from or use the gifted asset
• The value of any trust funds in respect of which the deceased had a right to the income
It should be noted that no IHT is payable in respect of assets that pass to a surviving spouse who is domiciled in the United Kingdom or to a UK registered charity. Otherwise, if the value of the deceased’s assets (taking into account lifetime gifts, trust funds from which they received income etc.) exceeds the nil rate band allowance, currently £325,000, IHT is calculated on the value of the estate in excess of the nil rate band at 40%.
It is also the duty of an Executor to ensure that the deceased’s income tax and capital gains tax affairs are settled to the date of death and that any such tax due during the administration of the estate is paid before the estate is distributed.