November 22, 2021
After someone dies, their affairs need to be wound up and their estate distributed to the beneficiaries entitled to inherit. This can often be time-consuming and complex.
The person administering a will, known as the executor, has a duty to the estate to deal with the administration promptly and ensure that all of the liabilities are discharged, with detailed estate accounts prepared giving details of this. The money in the estate must be properly managed and the terms of the will followed exactly.
If errors happen and the estate suffers losses, the executor will be personally liable for those losses, even if the mistakes were genuine.
The executor is responsible for identifying all of the estate’s assets and liabilities. This can be complicated if the deceased held numerous accounts, shareholdings, life policies, pensions and valuable items. It is also important to approach all likely creditors to ensure that all debts are identified and paid. Failure to do this can cause complications, if assets or liabilities come to light at a later date, after the estate has been distributed.
Calculating the right amount of Inheritance Tax can be complicated. The estate’s assets need to be accurately valued. The executor will also need to do some investigation into any cash gifts or other valuable items that were given away by the deceased during the last seven years of their life, as Inheritance Tax may be payable on these on a sliding scale, depending on when the gifts were made.
Once the Inheritance Tax liability has been calculated, the executor will need to account to HM Revenue and Customs for the amount due and obtain a receipt to enable them to apply for a grant of probate. A common problem is undervaluing an estate, meaning that insufficient Inheritance Tax is paid, leading to a further liability at a later date.
If the will leaves assets in trust, then it is the executor’s responsibility to set up the trust correctly and ensure that the right money or assets are transferred into the trust. Failure to do this can leave the executor open to claims by the beneficiaries of the trust, if the money intended for them has not been properly protected.
Identifying the correct beneficiaries is not always straightforward, particularly if the will leaves money to ‘my children’, without actually naming them.
In some circumstances, it may be necessary to place advertisements to try and identify any missing or unknown beneficiaries.
Administering an estate can involve a large amount of paperwork and a considerable investment of time, often more than originally anticipated. It can also be a stressful task at what is likely to be a difficult time.
Where delays are experienced or the process doesn’t run smoothly, tensions between family members can arise, which is the last thing the deceased would have wanted.
If you will be responsible for administering an estate, but you do not feel able to take on the work involved, you can instruct an expert probate solicitor to deal with it on your behalf.