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WHAT ARE THE STEPS TO OBTAIN A GRANT OF PROBATE AND ADMINISTER AN ESTATE?
Stage 1: Assets and Liabilities
Generally, it is always necessary to establish the nature and value of all assets and liabilities of an estate. Evaluations of the assets may also be required and this shall be assessed on a case by case basis.
Stage 2: Inheritance Tax (IHT)
Upon confirmation of the value of the assets and liabilities, an assessment of the inheritance tax and the relevant returns to be filed can be carried out (the IHT 400). The application and evidence shall be submitted to HMRC and tax paid to the revenue within 6 month from the time of the death to avoid interest.
Inheritance tax, at a rate of 40%, may be due if the assets in the estate amount to a total in excess of £325,000. Exceptions however apply and each matter shall be assessed on its own.
Stage 3: Application for the Grant
The Grant, entitles those appointed by the Court to deal with the deceased’s estate and collect assets, pay liabilities and make final distribution.
The persons entitled to apply for the Grant, depend on whether the deceased left a Will or have died intestate.
Stage 4: Collecting the assets and paying the liabilities
Once a Grant has been issued by the High Court the estate can be administered by the persons named up and until the final distribution. Any accounts can be closed, investments be sold and generally assets can be collected. From the overall amount, the persons administering the estate are under a duty to pay liabilities, expenses and legacies.
Stage 5: Finalising the estate
Those administering the estate are liable to income tax and capital gains tax. Tax returns shall be submitted and payments settled before the estate is finally distributed.
Examples of general Estates
The information provided in this schedule has been drafted as guidance for both pre-grant and post-grant legal activities, based on our experience, and a detailed estimate of fees should always be requested.
SIMPLE UK ESTATE
From our experience the administration of an estate of the following nature would cost between £5,000 and £10,000 plus VAT (currently at 20%).
The circumstances are:
- There is a valid Will (no codicils) leaving the estate to immediate family members only.
- There are bank accounts but no shareholdings.
- There are no disputes between relevant parties or claims against the estate.
- There is no inheritance tax due and no need to submit a full inheritance tax return to HMRC.
- There are no income tax or CGT reporting requirements.
- There is no requirement for any formal financial accounts.
Estimated disbursements – third party charges – are:
- Probate application fee of £158. This is currently a flat fee to include 6 official copies of the Grant.
- Executor swears £5 each. Executors are required to make oath in front of a solicitor who charges a standard fee.
- London Gazette fees between £100 and £200 plus VAT. Notices placed on the Gazette protect the interests of the Executors against any future unknown creditors.
Likely completion time
Generally such applications are completed within 4 months from the instructions and full information being provided.
Circumstances that may increase costs:
- The number of assets within the estate.
- HMRC enquiries regarding income tax or tax credits.
- Any delay in the provision of information.
MEDIUM UK ESTATE (CHARGEABLE TO IHT)
From our experience the administration of an estate of the following nature would cost between £10,000 and £20,000 plus VAT. This estimate does not include our fees for the sale of the property or any application to the Land Registry.
The circumstances are:
- There is a valid Will with up to two codicils which include a number of specific and cash legacies.
- There is one residential property.
- There are bank accounts.
- There are investments.
- There are insurance policies and bonds.
- There are no disputes between relevant parties or claims against the estate.
- There are no trusts.
- Inheritance tax is payable and full inheritance tax returns needs to be submitted to HMRC.
- A Trusts and Estates income tax return shall be filed for the period of administration.
- Full Estate Accounts are required.
Likely disbursements – third party charges – are:
- Probate application fee of £158. This is currently a flat fee to include 6 official copies of the Grant.
- Executor swears £5 each. Executors are required to make oath in front of a solicitor who charges a standard fee.
- London Gazette fees between £100 and £200 plus VAT. Notices placed on the Gazette protect the interests of the Executors against any future unknown creditors.
- Property Valuation Fee can vary between £750 and £1,250 plus VAT.
- Accountant’s fees can vary between £1,000 and £2,500 plus VAT
Tax liabilities
An estate of this nature is likely to include:
- Inheritance tax. Exact calculations can be provided upon all of the information is made available.
- Income tax and Capital gains tax. Persons named by the Grant are responsible for reporting to HMRC for all estate income and capital gains from the date of death to the date the administration is complete. We will calculate this for you and report it to HMRC unless agreed otherwise.
Likely timescale
On average the administration of an estate of this nature takes about 12 to 18 months to complete. Generally it may take from 4 to 6 months to obtain a Grant. Collection and distribution of the assets may vary and could take up to 3 month to complete. Inheritance tax accounts need to be issued by HMRC and such process may delay the final administration of the estate.
Possible factors which could increase costs:
- The number of legatees and compliance issues (we are now required to obtain identity information for all beneficiaries).
- Delayed communications from HMRC regarding the IHT.
- The existence of nominations in relation to life policies.
- Collating information for pre-death income tax reporting and a complex income position with any foreign income.
- Lengthy consideration of specific assets to be transferred to beneficiaries and the tax implications.
COMPLEX UK ESTATE
We anticipate that the administration of an estate of the following nature would cost not less than £20,000 plus VAT. This excludes the cost of selling the property or any first registration at the Land Registry.
The circumstances are:
- There is a valid Will with up to two codicils which include a number of specific and cash legacies.
- There is residential property and land.
- There is a family partnership or business.
- There are bank accounts.
- There are investments managed through a stock broker’s nominee name.
- There are insurance policies and bonds.
- There is a life interest trust which has come to an end on death.
- There are no disputes between relevant parties or claims against the estate.
- Inheritance tax is payable as the value of the assets exceeds the available allowances and claims for agricultural and business property relief can be made.
- A full inheritance tax return needs to be submitted to HMRC.
- Information will need to be provided to the family accountants for them to prepare and file the income and gains of the estate for the period of administration.
Likely disbursements – third party charges – are:
- Probate application fee of £158. This is currently a flat fee to include 6 official copies of the Grant.
- Executor swears £5 each. Executors are required to make oath in front of a solicitor who charges a standard fee.
- London Gazette fees between £100 and £200 plus VAT. Notices placed on the Gazette protect the interests of the Executors against any future unknown creditors.
- Property Valuation Fee can vary between £750 and £1,250 plus VAT.
- Accountant’s fees can vary between £1,000 and £2,500 plus VAT
- Share Valuation Fee between £200 and £500 plus VAT
Tax liabilities
An estate of this nature is likely to include:
- Inheritance tax. Exact calculations can be provided upon all of the information is made available.
- Income tax and Capital gains tax. Persons named by the Grant are responsible for reporting to HMRC for all estate income and capital gains from the date of death up to the end of the administration period.
Likely timescale
On average the administration of an estate of this nature takes about 18 to 24 months to complete. Generally it may take from 4 to 6 months for the Grant to be issued. Collection and distribution of the estate assets may vary on a case by case basis. Inheritance tax accounts must be issued by HMRC.
Possible factors which could increase costs:
- The number of legatees and compliance issues (we are now required to obtain identity information for all beneficiaries).
- Valuation issues relating to land including any differing interests in it.
- Delayed communications from HMRC regarding the IHT and any claims for relief.
- Protracted considerations relating to partnership or business issues.
- Lengthy consideration of specific assets to be transferred to beneficiaries and the tax implications.
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