A quick guide to administering an estate in England & Wales and proposed changes to the process

The process in summary

• Ascertain whether the deceased left a valid Will appointing surviving executors - if so, those people can deal with the estate. If not, there is a prescribed order of people who can apply to deal with the estate as “administrators”. Executors and administrators are both known as “personal representatives”, or “PRs”.
• The PRs make enquiries to ascertain the deceased’s assets and liabilities immediately before death, and what they were worth. These values are relevant to determining whether inheritance tax (IHT) is payable. In some cases, eg, where everything is left to a surviving spouse or charity, there will be no IHT payable irrespective of the value of the deceased’s estate. PRs should also consider whether any IHT reliefs can be claimed, such as business property relief or agricultural property relief. There are a number of conditions for these reliefs, which must be considered carefully.
• PRs must submit an IHT return and, if there is a tax liability, arrange payment. It may, however, be possible to pay IHT by instalments on certain assets such as land.
• In most cases the PRs also need to apply for a “grant” to prove they are the right people to deal with the estate. Executors obtain grants of probate, and administrators obtain a grant of letters of administration. Grants enable the PRs to collect the deceased’s assets and pay any liabilities.
• PRs should also ensure that the deceased’s, and estate’s, income tax affairs have been dealt with correctly.
• Once matters are finalised and any clearance has been issued by HMRC, the PRs can distribute the estate to the beneficiaries in accordance with the deceased’s Will or under the rules of intestacy. Where the estate is held on ongoing trusts, the PRs transfer the assets to the trustees to manage of behalf of the trust beneficiaries going forward.
• Before making distributions, the PRs should consider placing notices under Section 27 of the Trustee Act 1925 in the Gazette and in a local newspaper. This gives creditors an opportunity to notify debts owed to them by the estate. By placing these notices and waiting two months from the date of the notices before distributing assets, creditors have no recourse against the PRs personally – they would need to try to recover their debts from the beneficiaries directly.

Proposed changes to probate fees

The Government has consulted on the proposed reform to fees for obtaining a grant of probate and this month published its response to the consultation. In summary, the changes to be implemented include:

1. Raising the threshold below which there is to be no probate fee from £5,000 to £50,000.
2. The removal of probate fees from the statutory remissions scheme. A fee exemption has historically been available to those receiving certain means tested benefits.
3. The introduction of a tiered fee structure whereby the probate fee would be determined solely by the value of the deceased’s estate. The current probate fees are fixed at £215 where there is to be a personal application for a grant and £155 where an executor/administrator has legal representation.

This change is perhaps the most drastic and significant and will effectively penalise those with more substantial estates. As an example, for those leaving net estates with a value in excess of £50,000 but not exceeding £300,000 the proposed fee would rise to just £300; whereas the fee for a net estate exceeding £2,000,000 would rise to £20,000!

A joint statement issued by the Lord Chancellor, Lord Chief Justice and Senior President of the Tribunal stated that: “we have a justice system that is the envy of the world, but we must continue to invest in it to ensure it remains just, proportionate and accessible”. The consultation document was however explicitly clear that the proposed increases are not required to fund the probate service which is fully self-funding on the current fees.

It could be argued that the same amount of work is required by the Probate Registry irrespective of the value of an individual’s estate. Furthermore, critics may conclude that, as the current fees reflect the level of work required to review the papers and issue a grant, the new tiered fee system is merely a veiled attempt to impose an additional tax on higher value estates.