Estate administration procedure in the UK

• The personal representatives (‘PRs‘) are responsible for administering the estate following a death. The PRs will either be appointed under the Will (i.e., executors) or, in the absence of a Will, by the Court.

• The PR will be responsible for applying for the Grant of Representation (which gives them authority to deal with the deceased’s assets), collecting in the assets, paying any debts and tax due and distribute the assets to beneficiaries in accordance with the Will or intestacy rules (if not Will). Inheritance tax forms will need to be filed with HMRC (and the relevant tax paid) before the Grant is issued.

• The large part of the administration procedure will usually take a year, but it can take much longer than this for the estate to be wound up and issues such as difficulty locating and/or collecting in the assets and calculating the inheritance tax due and reliefs applicable (if any) can be time and cost-intensive.

Introduction 

The personal representatives (‘PRs’) are responsible for administering the estate following a death.  The PRs may be executors appointed under the Will.  Alternatively, if there is no Will, the PRs may be the administrators appointed by the Court.  The PRs role can broadly be summarised as follows: 

• to apply to the Probate Registry for the Grant of Representation, which is their formal authority to deal with the assets of the deceased.  A Grant of Representation may be referred to as a Grant of Probate in the case of an executor(s) application or Letters of Administration in the case of an administrator(s) application; and 
• to collect in the deceased’s assets;  
• to pay any debts and the inheritance tax (‘IHT’), if due; and 
• to distribute the estate between the beneficiaries in accordance with either the Will, or if there is no Will, in accordance with a set of statutory rules, referred to as the ‘intestacy rules’ – in a international context, the determination of what rules are relevant and applicable to the devolution of an individual’s estate can be complex and depends, broadly, on the type of assets (whether movable or immovable property) and on the deceased’s domicile status at the date of death.

Preliminary matters 

Having checked that the Will is formally valid and whether there are any unusual circumstances which may result in queries being raised by the Probate Registry, the next points to consider are: 

• are the gifts under the Will valid and are there sufficient assets (net of liabilities) to cover them?
• anyone who was financially dependent on or closely related to the deceased and was not adequately provided for in the Will may have a claim on the estate under the Inheritance (Provision for Family and Dependents) Act 1975.  Is anyone likely to apply under the Act or contest the Will? This will only be relevant if the deceased had a domicile in England and Wales on his death.
• Where are the assets located and what are the assets covered by the relevant Will? 
• Are there any other wills in place which may revoke or alter the provision of the relevant Will?
• what exemptions and reliefs can be used to reduce IHT?
• did the deceased make any substantial gifts during the last 7 years of their life? Did the deceased have an interest in any trusts or settlements? These may affect the liability to IHT.
• are the PRs named in the Will happy to take on the role?  Depending on the circumstances this can be demanding in terms of time and responsibility.  Before the Grant is taken out it is a simple matter for an executor to renounce or to have ‘power reserved’, a compromise whereby they do not take out the Grant but reserve the right to do so at a later stage.  Once a PR has taken out the Grant, however, it is very difficult to resign or retire.

Applying for the Grant 

The following are the steps leading to the Grant: 

Ascertaining the value of the estate: the first step is to identify the assets and liabilities of the estate.  Information will be required from banks, building societies and other institutions about the value of the deceased’s assets they are holding.  Professional valuations will likely be needed for stocks and shares, land and other specialist assets. 

Preparing the Inheritance Tax Account and calculating the IHT: once the values for the assets and liabilities have been obtained, an Inheritance Tax Account will be completed setting out the details of the estate and calculating the amount of IHT payable, if any.  A payment of the IHT must be paid before a Grant will be issued.  Once the Inheritance Tax Account has been signed off by the PRs, it is sent to HM Revenue and Customs (‘HMRC’) with the payment of the tax.  On receipt of payment and the Inheritance Tax Account, HMRC will issue a stamped form of receipt (the IHT421) directly to the Probate Registry.  

The Probate Application: The application for the Grant will be prepared when the Inheritance Tax Account is produced.  The original Will (and any Codicils) will need to be sent to the Probate Registry when the Probate Application is made – a translation will be required should the Will be in a foreign language.  

After the Grant: The PRs have the authority to call in the deceased’s assets once the Grant has been issued by the Probate Registry.  The PRs will need to settle the debts in the estate before distributing specific gifts that are included in the Will, such as cash gifts.  PRs need to keep estate accounts to document the movements in the estate and also confirm each beneficiary’s entitlement (in accordance with the Will or the intestacy rules).  The PRs will also need to complete estate tax returns, to report any income and capital gains made during the administration period, before finalising the estate.  Once these are resolved and clearance has been obtained from HMRC, the final distributions can be made to the beneficiaries.  

While the greater part of the administration is usually completed within a year, it can be some considerable time before the estate is finally wound up.