Estate Administration summary
ESTATE ADMINISTRATION SUMMARY
The business of administering an estate can be broadly divided into three stages which is likely to include the following:-
1. First Stage: Immediate steps and pre-grant work:-
- Consideration of the Will and its provisions, or in the absence of a valid Will, assessing the entitlement to act in the administration under the intestacy rules
- Securing assets
- Notifying those who are entitled to benefit from the estate
- Notifying creditors and asset holders of the death
- Obtaining full details of all assets and liabilities of the estate, and specifically the values as at the date of death
- Establishing the deceased's lifetime gifting habits
- Completing the HM Revenue and Customs Inheritance Tax Account for the personal representatives' (the executors or administrators dealing with the administration) agreement and signing, and submitting the account and any supporting evidence thereafter
- Completing the application for the Grant and the legal statement for the personal representatives' agreement and signing before submitting the application and supporting evidence to HMCTS Probate Registry
- Where relevant, arranging payment of any Inheritance Tax within the payment window using available estate funds, or where there are insufficient estate funds available, exploring options and directing the personal representatives on raising funds through bank loans or other estate assets etc.
- Receiving in estate funds and dealing with any assets that do not require a Grant
Timescale: Typically we would hope to reach this stage within three to six months but this will depend upon the response times of third party asset and liability holders.
2. Second Stage: Grant issues and is available:-
- Receiving the issued Grant
- Registering the Grant with all appropriate banks, pension providers, share registrars, other financial institutions, government agencies, etc.
- Dealing with all assets that require the Grant i.e. encashing and closing bank accounts, affecting the sale of the property or transfer of ownership, selling shares or transferring ownership etc.
- Discharging the remaining liabilities and debts of the estate using available funds
- Discharging any loans used to pay Inheritance Tax due from the estate
- Placing statutory advertisements for beneficiaries and creditors
- Paying any legacies and obtaining receipts
Obtaining the Grant is a significant milestone in the administration of the estate as it unlocks the remaining aspects of the estate and moves this ever forward to the completion of the process.
HMCTS Probate Registry is currently advising that it will take around eight weeks (two months) to process an application, although this can be delayed should a query be raised against the application.
It is at this stage we need to think about statutory advertisements. It is usual practice for personal representatives to place notices in the London Gazette and local newspaper to advertise for creditors. The notices generally cannot be placed until receipt of the grant of probate/representation and creditors are given two months to step forward. Where professionals are acting as personal representatives no distributions will be made until the expiry of this period.
On the key event of the Grant issuing, a procedural clock starts ticking. The executors need to be alert to the risk that the estate may need to answer a claim brought under the Inheritance (Provision for Family and Dependents) Act 1975. Under this legislation, certain qualifying people may bring a claim against a deceased’s estate if they consider they have not been provided for and they believe they should have been, or they have been provided for but not adequately. Claimants have up to six months from the date the Grant of Representation issued to bring their claim with the courts, although this period may be extended by the court in extenuating circumstances. The Claimant has a period of four months in which to serve their claim upon the executors of the estate. It is therefore recommended that the executors defer the full distribution of the estate until six to 10 months after the Grant is issued and allowing the risk of the claim to pass, although in some circumstances interim distributions may be considered reasonable.
Timescale: Taking everything into account, the second phase can take around six months and possibly more than a year depending on the make-up of the estate.
3. Stage Three: Winding up the estate to complete the administration
- Where necessary, submitting any corrections needed with regards to the Inheritance Tax position reported to HMRC in the early stage of the administration (submitting a corrective account) and agreeing on the final liability and making any balance payment before obtaining HMRC's Certificate of Discharge
- Where necessary, completing and submitting Income Tax and Capital Gains Tax Returns to HMRC and securing Certificates of Deduction of Tax
- Preparing and finalising the Estate Accounts for the personal representatives' agreement and signature
- Circulating the agreed Estate Accounts to residuary beneficiaries
- Making the final distributions and obtaining receipts
Timescales: The third stage is the homeward stretch and we would hope to complete this within eight to 12 weeks but this could be longer if a corrective account is required or submission of Income Tax and Capital Gains Tax Returns are to be submitted.
No one estate is the same and there are a variety of factors that may impact the length of time it will take to conclude the process; i.e. the timescales of third parties such as banks, pension companies, share registrars and government agencies, if a challenge is raised against the estate, if there are strained relations between beneficiaries and/or executors, or certain assets require completion of strict and inflexible procedures before they can be released to the estate, such as US shareholdings, etc.