‘Probate’ is a term commonly used when talking about applying for the right to deal with a deceased person’s affairs. It’s sometimes called ‘administering the estate’. This page contains information about what to expect if a loved one’s estate is in probate.
In practice, different terms are used, depending on whether or not the deceased person made a Will and where they lived. This information covers probate in England and Wales.
Different Terms Associated with Probate
If the person who has died leaves a will
In this case one or more ‘executors’ may be named in the will to deal with the person’s affairs after their death. The executor applies for a ‘grant of probate’ from a section of the court knows as the probate registry. The grant is a legal document that confirms that the executor has the authority to deal with the deceased person’s assets (property, money and possessions). They can use it to show they have the right to access funds, sort out finances, and collect and share out the deceased person’s assets as set out in the will.
If the person who has died didn’t leave a will
If the deceased didnt plan and died without a Will a close relative of the deceased can apply to the probate registry to deal with the estate. In this case they apply for a ‘grant of letters of administration’. If the grant is given, they are known as ‘administrators’ of the estate. Like the grant of probate, the grant of letters of administration is a legal document which confirms the administrator’s authority to deal with the deceased person’s assets.
In some cases, for example, where the person who benefits is a child, the law states that more than one person must act as the administrator.
If the person who died lived in Scotland
If the deceased person lived in Scotland you apply for a ‘grant of confirmation’.
This is a general term which means executor or administrator.
Grant of representation
This is a general term which includes grants of probate and grants of letters of administration
Is a grant of probate/representation always needed?
When a grant is needed
A grant is almost always needed when the person who dies leaves one or more of the following:
* stocks or shares
* certain insurance policies
* property or land held in their own name or as ‘tenants in common’
In most cases above, the bank or relevant institution will need to see the grant before transferring control of the assets. However if the estate is small some organisations, such as insurance companies and building societies, may release the money to you at their discretion.
When a grant may not be needed
A grant of representation may not be needed where:
* the person who died left less than £5,000
* they owned everything jointly with someone else and everything passes automatically to the surviving joint owner
To establish whether the assets can be obtained without a grant, the executor or administrator would need to write to each institution informing them of the death and enclosing a photocopy of the death certificate (and will if there is one).
Probate and Inheritance Tax
The personal representative won’t be granted probate until some or all of any Inheritance Tax that is due on the estate has been paid.
Valuing someone’s estate for Inheritance Tax
When valuing a deceased person’s estate you need to include assets (property, possessions and money) they owned at their death and certain assets they gave away during the seven years before they died. The valuation must accurately reflect what those assets would reasonably fetch in the open market at the date of death.
When do you carry out the valuation?
Valuing the deceased person’s estate is one of the first things you need to do as the personal representative. You won’t normally be able to take over management of their estate (called ‘applying for probate’ or sometimes ‘applying for a grant of representation/ confirmation’) until all or some of any Inheritance Tax that is due has been paid.
But bear in mind that Inheritance Tax is only payable on values above £325,000 for the 2010-2011 tax year.
Key steps in valuing someone’s estate
Take the value of all of the assets that they own, together with the value of:
* their share of any assets that they own jointly with someone else: for example a house that they own with their partner
* any assets which are held in a trust, from which they had the right to benefit
* any assets which they had given away, but in which they kept an interest: for instance, if someone gives a house to their children but still lives in it rent-free
* certain assets which they gave away within the last seven years
From the total above deduct everything that the deceased person owed, for example:
* any outstanding mortgages or other loans
* unpaid bills
* funeral expenses
(If the debts exceed the value of the assets owned by the person who has died, the difference cannot be set against the value of trust property included in the estate.)
The value of all of the assets, less the deductible debts, is their estate. The threshold above which the value of estates is taxed at 40 per cent is £325,000 for the 2010-2011 tax year.
Can you use estimates if you don’t know the exact value?
If you don’t know the exact amount or value of any item, such as an Income Tax refund or household bill, you can use an estimated figure. But rather than guessing at a value, try to work out an estimate based on the information available to you.
You’ll find instructions about how to show estimates on the form you complete.
Forms to complete
The forms on which you’ll need to record the valuation will differ, depending on the expected valuation amount. You complete a form IHT205 for estates where you don’t expect to have to pay Inheritance Tax (called ‘excepted estates’) and a form IHT400 where you do expect to have to pay. The forms vary for excepted estates in Scotland.
Getting help with the valuation
You should be able to value some of the estate assets quite easily, for example, money in bank accounts or stocks and shares. In other instances, you may need the help of a professional valuer (or chartered surveyor for valuing a property). If you do decide to employ a valuer, make sure you ask them to give you the ‘open market value’ of the asset. This represents the realistic selling price of an asset, not an insurance value or replacement value.
If the affairs of the estate are complicated, you may want to work with a solicitor to help you value the estate and pay the tax. If you’re not using a solicitor you can ask HMRC to use form IHT400 to work out any Inheritance Tax due.
The Probate and Inheritance Tax Helpline offers information. Telephone: 0845 302 0900. Lines are open 9.00 am to 5.00 pm Monday to Friday.