13.6 Grants of representation Flashcards
What is a grant of representation?
A grant of representation is legal document confirming a person’s authority to administer the deceased’s estate
What does a grant of representation do?
- It grants authority to the PRs to collect in and distribute the deceased’s assets; and
- It validates the deceased’s will or confirms that the deceased died intestate
Without the grant, the PRs cannot collect in the assets necessary to distribute them to the beneficiaries. Banks in particular will not give PRs access to the accounts unless they receive the grant as proof of the PRs’ authority.
What are the 3 types of grant?
- Grant of Probate
- Letters of administration with will annexed
- Letters of administration
When is the grant of probate used?
Grant of probate: Applies when there is a will that has appointed executors who are able and willing to act. Executors take out the grant. Use form PA1P.
When are the letters of administration with will annexed used?
Letters of administration with will annexed: Where there is a will that has not appointed executors or the executors are dead/incapable or willing to act. [Problem with executors]. Use form PA1P.
When are the letters of administration used?
Letters of administration: Where there is no will. The applicant for grant is determined by the intestacy order (Rule 22 NCPR). Use form PA1A.
What are the essential steps before applying for a grant of representation?
Essential steps to obtain a grant of representation (R.A.V.A.C)
R Registration: Register the death
A Assets: Assets valued to confirm value of total estate
V Validity: Consider the validity of the will and claims against the estate
A Advertise: Advertise for unknown beneficiaries and creditors
C Calculate: Calculate the payment of IHT
How many people can apply for grant?
Grant of probate: Minimum 1 executor, max 4. Note the will can appoint as many executors as it likes but only up to 4 can apply for grant.
Letters of administration with will annexed: Minimum 1, maximum 4 administrators.
EXCEPTION: If any beneficiary is a life tenant or minor, 2 or more administrators must take out the grant.
Letters of administration: Minimum 1 max 4 except if a beneficiary is a life tenant or minor, in which case you need 2.
What are the court’s powers in respect of the grant of representation?
Court has discretion to make a grant for someone else who is entitled under the NCPR, can also remove an existing personal representative and appoint a substitute
What happens if under a will a minor is appointed as sole executor?
A minor can be appointed executor under a will, but they cannot take out grant. That means the minor’s parents will take out grant as administrators (letters of administration with will annexed), until the minor comes of age.
UNLESS
The minor has no interest in the residuary estate, in which case the beneficiary entitled to the residuary estate will be the administrator until the minor comes of age.
If the minor is a beneficiary, 2 people will need to be administrators.
If the minor is a co-executor and there are other executors willing and able to act, they will take out grant with a power reserved for the minor to take out grant when they reach 18.
Who applies for grant if there is a will with no executors?
No executors and a will is in place? No problem - the order is set down in Rule 20 NCPR:
[Executor] Any named executor (if any)
[Trustee of residuary estate] The trustee of the residuary estate;
[Residuary beneficiary] Any other residuary beneficiary (whether life tenant or interest) OR a beneficiary under the estate if there is partial intestacy
[PR of residuary beneficiary - no life tenant] The PRs of the residuary beneficiary (unless taking as life tenant) or the partial intestacy beneficiary (if either dead)
[Other beneficiary / creditor] Any other beneficiary or creditor
[PR of other beneficiary / creditor - no life tenant] PR of any other beneficiary or creditor if dead
If a minor would be administrator, their parents apply with power reserved.
What is a grant de bonis non and when is this made
When there is no will.
Second grant made to allow the completion of the administration of the deceased’s estate, following the death of the sole or last surviving personal representative - or where a previous grant has been revoked.
What is a chain of representation and when does this occur?
When there is a will.
No grant de bonis non is necessary where a chain of representation exists. This happens when a sole or last surviving executor dies and that executor’s executor takes a grant of probate (will is required, if intestate then a grant de bonis non is needed)
Who can become an administrator of an intestate’s estate?
Rule 22 NCPR: Sets out the order of entitlement to be an administration if there is no will. Follows same order as entitlement to the estate itself.
- Surviving spouse (or civil partner);
- Issue of the deceased or predeceased child;
- Deceased’s parents;
- Deceased’s brothers and sisters of the whole blood (and issue of the predeceased);
- Deceased’s brothers and sisters of the half-blood (and issue of the predeceased);
- Grandparents
- Uncles and aunts of the whole blood (and issue of predeceased);
- Uncles and aunts of the half-blood (and issue of predeceased);
- The Crown; and
- Any creditor of the deceased
When is an estate an “excepted estate” for the purposes of paying IHT?
Excepted estate = no IHT payable. Two kinds of excepted estate:
Low value: The gross value of the estate is less than £325,000 (NRB) - “gross” meaning before deductions and reliefs), or £650,000 if applying with the full TNRB
Exempt excepted: The gross value of the estate is above £325,000 (£650,000 if full TNRB is being used) but not more than £3m and after the spouse and charity exemptions have been applied falls below £325,000 (£650,000 if full TNRB being used)
IHT is ONLY payable on non-excepted estates.
What is the effect of IHT liability on the application process for grant?
If non-excepted estate, IHT forms must be submitted to HMRC.
If this is an excepted estate and no special factors apply, no IHT is payable. You can immediately apply online for grant using the PA1A / PA1P forms and give a gross and net value of the estate in those forms. Submit the will and death certificate. No IHT 400 form is required.
What factors may mean that you will need to fill in an IHT 400?
- Deceased gave gifts that were paid into trusts (CLTs);
- Deceased made a GROB in their lifetime (GROB - deceased gave a gift but continued to enjoy it afterwards for 7 years before death);
- The deceased was ‘deemed domiciled’ in the UK or was living permanently outside of the UK when they died but had lived in the UK previously
- The deceased increased the value of a lump sum pension payable after death while terminally ill or in poor health;
- The deceased had an annuity and a life insurance policy that paid out to someone other than the spouse or CP;
- The deceased owns foreign property worth more than £100k;
- The estate contains an interest in more than one trust;
- The estate has an interest in a trust worth more than £250k;
- In the 7 years before death, the total value of non-exempt gifts made by the deceased exceeded £250k
- Assets held in trust pass to spouse / CP or charity are worth £1m or more, or £250k or more after the deduction of the spouse and charity exemptions
If any of the above factors apply, HMRC needs to be informed, even if no IHT is payable. Send the IHT 400 form to HMRC
What is the process for applying for grant for a non-excepted estate?
- Pay IHT within 6 months from the end of the month within which the deceased died to avoid interest. Send to HMRC:
- IHT 400
- Money to pay the IHT - Apply to the Probate Registry for grant. Send:
- Original will and any codicils (if necessary)
- PA1P / PA1A (containing a statement of truth)
- Submit the code from HMRC
- Death certificate
- Probate court fee (£273)
A grant cannot be obtained until the due tax is paid.
What assets can be valued by death certificate?
£5000 held in National Savings Bank accounts,
national savings certificates,
premium savings bonds,
building society funds (at discretion of institution)
What assets can be valued immediately?
Chattels - no proof required to value and collect in chattels (furniture, jewellery, clothing, cars)
What assets pass outside the succession estate?
Bank accounts held as joint tenants with another (spouse, civil partner),
insurance policy proceeds written in trust,
death in service pension benefits.
What are the vitiating factors that could affect approval of grant?
Grant of representation may be affected by a caveat /citation to take probate or a citation to accept or refuse a grant
Caveat: Caveat may be lodged with the Probate Registry to prevent the issue of a grant of representation. The caveator might do this if they are a beneficiary and they believe that the executor named in the will lacks mental capacity to act or they believe the will to be invalid. (Valid up to 6 months).
Citation: Used when an executor has lost their right to renounce probate by intermeddling with the estate, but has not applied for a grant and does not intend to do so. Once cited by the Probate Registry, the executor must proceed with an application for a grant of probate.
How are assets and liabilities valued overall?
A solicitor acting for personal representatives needs to obtain details of the deceased’s assets and liabilities. Valuations can typically be obtained via correspondence with institutions, such as
banks and insurance companies. Sometimes expert assistance will be required from, for example, accountants and surveyors to ascertain the open market value of assets at the date of death.
If the deceased was a co-owner of land at their death, the market value of their interest will usually be discounted to reflect the difficulty of selling a part interest in land. A 15% discount is
normally considered acceptable for residential property and a 10% discount for investment property. HMRC will not permit any discount in value for land co-owned with spouses or civil partners. The discount is not applicable where other assets are co-owned.
How is IHT funded in order to obtain the grant?
1) Banks and building societies may release the deceased’s account funds directly to HMRC to pay IHT before grant. This direct payment scheme is a voluntary one that banks and building societies may join. Funds may be used to cover funeral expenses in a similar way.
2) A bank loan may be taken out. Usually, an undertaking has to be given by the personal representatives and/or their solicitor to account to the lender from the first proceeds of realisation of estate assets.
3) A loan from a beneficiary may be sought.
4) There may be a sale of assets, for example, chattels or quoted shares (where no grant is needed prior to sale).
5) Insurance policy payments may be used to satisfy IHT. If the proceeds of life assurance are payable to the estate, the insurance company may pay them directly to HMRC.
6) Applying to HMRC to postpone payment of all or some of the tax until after the grant has been obtained. Once the grant has been issued, payment of outstanding tax needs to be paid as soon as possible. An application needs to be made to HMRC with a statement
confirming that it is not possible to release funds from the estate using the methods described in “finding money to pay IHT”. If HMRC agrees to a grant on credit, they will require the signing of an undertaking containing a legally binding obligation to pay the tax
within an agreed timescale.
