Administration preliminary steps Flashcards
What are the pre-grant steps?
- Death certificate and funeral
- secure estate assets
- list of assets - taxable estate and succession estate
- locate will/codicils
- check for executors
- basis of distribution & identify beneficiaries
- schedule of assets and lifetime transfers
- Tax - IHT400
What must PR do before application of a grant?
A duty to report to HMRC about estate assets and liabilities, and pay any IHT due
- A grant will not be issued until information about the estate is provided to HMRC and any IHT is paid
How is the value of bank accounts established?
Request from bank summary of account balance on the date of death, plus any accrued interest
How are low value chattels valued?
Usually acceptable to estimate their value. The probate value (what they fetch if sold) is normally lower than their value for insurance purposes
Single items worth more than £500 or unusual items valued:
A formal probate valuation must be obtained
- professional valuation
Establishing value of quoted / unquote shares
Quoted shares:
- They are valued by taking the lower of the two prices on the Stock Exchange Daily List and adding one-quarter of the difference between the higher and lower value.
= take one-quarter of the difference between highest and lowest valuations, added to the lowest value
Unquoted shares:
- specialist valuer instructed
How is land valued?
PRs instruct estate agents
How should this estate be valued: a man died leaving an estate including two properties and a collection of rare books
- full market value of the assets at the date of death determined by a professional in writing
- properties valued by an estate agent
- books valued by an expert (unusual / valuable item)
How can the PRs pay IHT from bank savings account?
The bank should be asked for a cheque or direct payment to HMRC
When is IHT 400 used?
Unless the estate is excepted, PRs report to HMRC about the estate assets and liabilities by completing IHT 400
What happens if the estate is excepted (and no IHT 400 needed)?
An excepted estate is:
- low value excepted estate
- exempt excepted estate
If estate is excepted, the PRs provide information about the estate as part of the application for grant of representation
What is a low value excepted estate?
No IHT payable because gross value of the estate is below NRB
What is an exempt excepted estate?
- Gross value of estate is no more than £3million, but
- No IHT is payable because after debts and deducted AND spouse/charity exemptions are applied, the net value of the estate is below NRB
(debts alone do not bring it into exempt excepted estate status)
Example: An estate with a value of £1,000,000 includes a house, cash and a portfolio of shares but no other significant assets. The deceased left everything to their spouse. The executors of the estate are making the application for a grant of probate.
What is procedure when executors comply with obligations to HMRC?
No formal account is required, although executors will confirm values as part of application for grant
- although estate exceeds NRB, it is not higher than £3million, a nd meets criteria for exempt excepted estate
- Form IHT 400 does not need to be submitted
–> example of exempt excepted estate
What additional factors will prevent an estate from being excepted?
Exceptions where an estate can never be exempted:
- GROB
- Foreign assets at more than £100k
- Life interest trust worth more than £250k
- Value of specified transfers exceeds £250k
- Claim for RNRB is being made
If one of these applies, need to fill out and submit IHT 400
Foreign domiciled estates
An estate may also be excepted if the deceased was not domiciled in UK and owned relatively small amount of UK assets
- deceased must never have been domiciled or treated as domiciled in UK
- gross value of estate in UK must not exceed £150k
- UK estate consists only of cash or quoted shares
Application process for a grant
Information is provided to Probate Registry by:
- completing and posting a paper application form to Probate Registry
- submitting an online application via HMCTs service and answering relevant questions
What is a PA1A?
PA1A: deceased did not leave a valid will (NCPR 22 applies)
(“a” for absent will)
What is a PA1P?
PA1P: deceased left a valid will
(“p” for properly left will)
What documents must be submitted to the probate registry?
- the original will (copies are not accepted)
- a form of renunciation (if applicable)
- probate registry fee
Is the IHT form sent to the Probate Registry?
NO
- IHT 400 is sent to HMRC
- HMRC then send the executors a code and executors include this code when making the application
When is IHT paid?
Before the application to the probate registry
What is the correct procedure for making an application for grant of probate?
The executor needs to complete the probate application form, complete the statement of truth, and send these documents, with the original will and fee to HMCTS
Correct order of steps before applying for grant of representation
- obtain funding
- pay IHT
- sign statement of truth
- obtain grant
- collect in estate
- pay interim distribution
- estate accounts
- final distribution
When is an executor under a will unable to act:
- pre-deceased the testator
- minor
- lack capacity
- former spouse and divorce/dissolution took place after will made
If one of the executors lacks capacity - the other should take out a grant with power reserved
What is the grant of double probate?
To act later, the executor who reserved power can apply for a grant of double probate to run concurrently with the original grant
- only appropriate if administration is not yet complete
How is power reserved?
If an executor does not initially want to act but wants to retain the obtain the option
- must be at least one other executor
- power reserved is indicated on the form to apply for grant of probate
- executor who has intermeddled can still reserve power
- there is no form of reservation
What happens if there is a litigation relating to the estate?
The executor may obtain a temporary grant to allow them to defend the action, and apply for a full grant once the probate action is settled by the court
When can a temporary grant be issued?
Where a grant is needed quickly to preserve the assets of the estate, such as business (sole trader) which executors need to run until the grant of representation is issued
What happens if there are potential grounds to challenge the appointment of an executor?
An individual may enter a caveat in relation to the will, f they have an interest in the estate and there are grounds to challenge the executor’s suitability
What are the courts powers if there are concerns as to an executor’s suitability?
The court has the power to pass over the person who would be entitled to apply for a grant and appoint the person it thinks expedient
