‘Probate’ in this sense means the validation at Court of the last Will of the person who has died and then the administration of their assets and paying off all debts, and ultimately distributing the leftover assets to the beneficiaries of the Will or Intestacy.
Processing probate applications
The lockdown periods have definitely affected the period for obtaining Grant of Probate. In order for Probate to be granted, Inheritance Tax clearance is first required. This usually involves HMRC in the process unless the value is within certain thresholds. HMRC have now sped up the process of obtaining clearance by sending their clearance certificates direct to the Probate Registry. The overall estimated time for obtaining the Grant following submission of the application is currently 2-3 months in total.
Court Probate Fees
It seems that previous Government plans to introduce a hike in Probate administration fees for obtaining a Grant of Probate have been put on hold but this be reviewed as part of the overall adjustments on taxation generally. It currently costs £215 to personally apply for a Grant of Probate (where there is a Will) or a Grant of Letters of Administration (where there is no Will). The plan had been to ‘tax’ estates on obtaining Probate so that an estate of over £2m in value would incur a £20,000 probate fee charge. Good estate planning (in terms of reducing the value of net estate that would apply on death) would help to mitigate the effects of a new law if it were to be brought in.
Checking Joint Property Ownership
We have seen a rise in Estates being incorrectly administered by people unaware that where a person dies leaving a property that is held ‘tenants in common’ with another joint owner, a Grant of Probate is almost certainly likely to be required.
‘Tenants in common’ means that the share owned by the deceased is a share that passes according to their Will or Intestacy. That is why the Will (or Intestacy) needs to be proved by applying for the Grant of Probate. Commonly, if a property is held ‘tenants in common’, it may go hand in hand with a Trust administration.
Executors of Wills that contain Trusts
There are options (and some recent changes in interpretation) as to how Will-trusts can be best administered. Within most ‘discretionary Will-trusts’ there are gifting options, loaning options and life interest options. Executors need to ensure that advice is taken before closing off an estate or passing the assets to beneficiaries.
Deeds of Variation
A Deed of Variation is a document varying an inheritance received. Traditionally, this was done if the beneficiary wished to pass the benefit down to his/her children and it avoided the need for the 7 year rule period to apply. The gift then was deemed to pass to the new beneficiary direct from the deceased’s estate and not as a gift from the first beneficiary.
For those inheriting value as an outright gift from a basic Will, there can be advantages for varying the inheritance such that it does not form part of their own estate but where they still continue to receive the full use and value for life. A discretionary trust is used within the structure of the Deed. It can have future IHT advantages as well as general protection of the asset value received by the first beneficiary.
It was thought that Government would do away with the allowances for Deed of Variation but the law remains relatively unaltered. So this is still very popular with our clients who are benefiting from an estate.