Guide for Executors

The role of an Executor is both a privilege and a responsibility.

 

The aim of this guide is to give an overview of matters involved in the administration of an estate.

 

It is your duty to ascertain all the deceased’s assets and liabilities, to preserve those assets pending encashment (or transfer to a beneficiary), to discharge the deceased’s liabilities, ensure that the deceased’s tax affairs are finalised and ultimately deal with the assets in accordance with the deceased’s Will.

 

Failure to comply with your obligations can render you personally liable and a lack of success in managing the expectations of the beneficiaries can cause unnecessary stress.

 

 

1.       Registration of the death and arrangements for the funeral

 

You may need to register the death with the Registrar of Births, Deaths & Marriages where there are no family members who are willing or able to do this.

 

Technically, as an Executor it is your duty to arrange for the funeral although in practice this is usually done by members of the family.

 

If the deceased carried a donor card or left any instructions concerning the use of their body for medical research it is necessary to contact the appropriate authorities immediately.

 

2.       Safeguarding the assets

 

As soon as possible after death, steps should be taken to ensure that the deceased’s property and effects are properly secured and insured for their full value.

 

It is also advisable at this stage to cancel delivery of milk, newspapers, etc.

 

3.       Ascertaining assets and liabilities

 

You will need to ascertain details of all the assets and liabilities of the estate. This entails going through the deceased’s belongings to establish details of bank accounts, pension arrangements, tax affairs, etc.; bank statements should also be checked to ensure that all regular payments in can be correctly identified with the assets to which they relate and payments out with all liabilities. The deceased’s computer may also reveal a spreadsheet of assets and liabilities in addition to Internet-operated accounts which might not otherwise come to your attention.

 

Contact should be made with all asset holders to register the death, ascertain the value of the asset at the date of death (including accrued interest) and to obtain a withdrawal form to enable the asset ultimately to be encashed. Similarly utility companies and creditors should be contacted in order that they are aware that there will be a delay in settling any accounts and to ascertain the precise value of all liabilities.

 

Where the deceased was a widow(er) it is also important to check for papers relating to their spouse’s estate. This information will be needed in order to claim any portion of the nil rate band which was not used up on the first death. For example, in a situation where a couple leaves all their estate to each other, then the second spouse can make a claim which will effectively double the nil rate band. 

 

4.       Dealing with personal chattels and joint accounts

 

The Executor’s authority stems from the Will. This enables you, if you so wish, to deal with the deceased’s personal chattels – furniture and effects and motor vehicles – before Probate is obtained. However, where Inheritance Tax is payable professional valuations will need to be effected before disposal.

 

Where the deceased held a joint account with their spouse the death should be registered and the account transferred into the sole name of the surviving spouse.

 

5.       Obtaining Probate

 

Where the total value of the estate exceeds £15,000 asset holders will usually require production of a Grant of Probate before releasing monies due to the estate. Probate is the document issued by the Court confirming your authority to deal with the deceased’s affairs.

 

To obtain Probate it is necessary to prepare and submit the appropriate Inheritance Tax form specifying the deceased’s assets and liabilities. Where no Inheritance Tax is payable then it is usually possible to give an approximate indication of the assets and liabilities. However, where Inheritance Tax is payable it is necessary for precise details of the assets and liabilities to be shown. In such cases a professional valuation of the deceased’s property and personal effects is required together also with an accurate valuation of any business assets and unquoted shares.

 

An Inheritance Tax Return must be submitted within 12 months of death although in practice this is usually done as quickly as possible; interest will be chargeable on any unpaid Inheritance Tax with effect from the six months after the end of the month in which death occurred.

 

It is the Executor’s duty to pay Inheritance Tax before Probate is granted. In many cases it will be possible to obtain payment from the deceased’s bank or building society account or National Savings products. Where there are insufficient assets of this nature a loan will be required to procure payment of Inheritance Tax. In the case of real property, i.e. land, and certain other assets Inheritance Tax may be paid by instalments.

 

At the same time as submitting the Inheritance Tax return the Executors must swear an oath in the required form confirming amongst other things that they will administer the deceased’s estate in a proper manner.

 

Once an application for Grant of Probate has been submitted Probate will normally be issued within four weeks where no Inheritance Tax is payable and within six weeks where the tax is payable.

 

6.       Realisation of Assets

 

As soon as Probate is granted it is usual to either encash assets or, where appropriate, arrange for them to be transferred to a beneficiary. When assets are encashed you should firstly discharge any liabilities and then pay any legacies specified in the Will. If a legacy remains unpaid 12 months after death then interest is payable to the legatee.

 

When all the assets have been encashed (or transferred), liabilities paid and the deceased’s tax affairs finalised a full set of accounts should be produced for the beneficiaries showing the estate’s assets and liabilities, income arising during the administration of the estate, administration expenses and how the estate is being distributed.

 

The Inheritance (Provision for Family and Dependants) Act 1975 enables certain close relatives of the deceased together with cohabitees to make a claim against the estate on the grounds that the deceased failed to make reasonable financial provision for them. Such a claim must (unless the Court otherwise consents) be made within six months of the date on which Probate is issued. Accordingly, where it is considered that such a claim may be made Executors would be ill advised to distribute the estate until six months after Probate has been issued.

 

It is your duty to pay any Inheritance Tax which may arise as a result of the deceased’s death. In order to calculate the Inheritance Tax payable, if any, it will be necessary to ascertain the value of:-

 

(a)      The deceased’s assets and liabilities at date of death

 

(b)      The value of any gifts which they have made in the seven years prior to death to the extent that these exceed the appropriate annual allowances

 

(c)      The value of any gifts made since 17 March 1986 where the deceased reserved a benefit from the gifted property

 

(d)      The value of any trust funds in respect of which the deceased had a right to income

 

(e)      Where the deceased was a widow(er) the proportion of the unused nil rate band on the estate of their spouse.

 

 

Where the aggregate value exceeds the nil rate band (the amount above which Inheritance Tax becomes payable) tax will be payable at 40% on the excess. No Inheritance Tax is payable in respect of assets passing to a spouse domiciled in the United Kingdom or to a UK registered charity.

 

Failure to make full disclosure or to incorrectly value assets and liabilities can result in you receiving a penalty for which you are personally liable.

 

It is also your duty to ensure that the deceased’s other tax affairs are finalised. This involves:-

 

(a)      liaising with the deceased’s Tax Inspector to ensure that Income Tax and Capital Gains Tax liability up to the date of death are finalised

 

(b)      ensuring that any Income Tax and Capital Gains Tax liability arising during the course of the administration of the estate is settled

 

In some cases it may be possible to mitigate the Capital Gains Tax payable during the administration of the estate. Similarly, a Deed of Variation of the Will may be advisable in order to mitigate the Inheritance Tax payable either in respect of the deceased’s estate or in respect of any future Inheritance Tax liability of a beneficiary.

 

 

Berwins llp Private Client Department has many years of experience in dealing with the administration of estates and a depth of expertise to ensure that an estate is administered in a competent manner giving you the peace of mind and satisfaction of knowing that matters have been administered in the best way possible.

 

In particular:-

 

-      Our dedicated computer case management system assists us in progressing matters in an efficient and cost effective manner.

 

-      We aim to give pro-active advice throughout the administration of an estate. Where possible, advice will be given with a view to mitigating the potential tax liability of the deceased’s estate and that of the beneficiaries.

 

-      We are able to arrange for beneficiaries to obtain independent advice as to the most appropriate means of investing their inheritance.

 

 

 

 

 

Bequest:                 A gift of a particular item under a Will

Chattels:             Personal possessions, e.g. furniture, jewellery and motor vehicles

 

Estate:                  Everything the deceased owned including investments, money, cars, life insurance

 

Executor:            A person specified in the Will of the deceased who is instructed to administer the deceased’s affairs

 

Joint Tenants:      A manner of ownership where more than one person holds an asset. Where the co-owners hold as joint tenants, then on the death of one person that asset passes automatically to the other

 

Legacy:               A gift of money specified in a Will

 

Letters of              The document issued by the Probate Registry authorising persons

Administration:   to deal with the administration of an estate where a person has died without leaving a Will

Nil rate band:      The amount below which Inheritance Tax is not payable

Personal             The person who administers the estate of the deceased, being

Representative:  either an Executor where a Will exists or an administrator where there is no Will

 

Probate:             The document issued by the Probate Registry confirming the authority of the Executors to deal with the deceased’s affairs

 

Residuary estate:   The estate which remains after payment of the deceased’s liabilities, payment of legacies and bequests

Tenants in           The alternative form of co-ownership to a joint tenancy. Where a

Common:            person holds as a tenant in common that person’s share in the property will devolve in accordance with the provisions of their Will rather than passing to the surviving co-owner

Testator:            The person who has made a Will

Trust:                 A gift of assets which do not pass outright to an individual. A trust will usually arise where:-

 

(a)         Successive interests arise, e.g. whereby A receives the income from the asset during their life and on their death it passes to B

(b)         The trustees have a discretion as to which of the beneficiaries specified in the trust can receive any benefit from the Trust assets

(c)         A beneficiary is either under the age of 18 or under the age specified in the Will at which they are to inherit