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It is the job of Executors (appointed under a Will) or Administrators (entitled by law where there is no Will) to deal with administering the estate of someone who has died.
Acting as an Executor or Administrator is a big responsibility - where there is a risk of personal liability and comes at an emotional time.
Executors or Administrators may therefore find it helpful to take legal advice to help them better understand the estate administration process and their duties. There are a range of legal assistance options available to Executors and Administrators ranging from instructing a solicitor to provide initial advice regarding the estate administration process and duties of Executors and Administrators right through to instructing a solicitor to deal with the entire process on their behalf.
Broadly speaking the estate administration process involves:
Locating the current original Will (if not already in your possession). This may be in the deceased’s possession, at a law firm local to the deceased or registered at a central Will registry.
Ascertaining the assets and liabilities of the estate as at the date of death and their values. This information may be found amongst the deceased's possessions; although it is likely enquiries will need to be made of various institutions where assets and/or liabilities may be held.
Preparing an Inheritance Tax return and paying any Inheritance Tax due. There are two types of inheritance tax form. Which one is required will depend on the nature and extent of the estate and whether any inheritance tax is due. It is worth noting that an Inheritance Tax return may still be required even where there is no Inheritance Tax to pay.
Applying for the Grant. It will not always be necessary to obtain a Grant but if there is a property in the deceased's name or if there are substantial assets then one will be required.
Collecting in the assets and settling any liabilities of the estate. This will involve sending a copy of the Grant to all relevant organisations.
Dealing with the Income Tax position for the administration. There will usually be some income arising during the administration period, whether that is interest on bank accounts or rental income etc. There is, however, a de-minimums level of income where income tax reporting will not be required
Preparing estate accounts. These will set out all of the monies in to and out of the estate during the administration period.
Distributing the estate in accordance with the Will or intestacy rules. Executors and Administrators should ensure that they have protected themselves adequately before distributing the estate. There are a number of ways Executors and Administrators can protect themselves.
Some key things to be aware of when dealing with estate administration are:
Ensuring you understand the terms of the Will (or the intestacy rules if there is no Will or no valid Will). These can be more complex if, for example, trusts are created or a beneficiary has died.
Ensuring you are aware of the time limits for various claims against the estate, for filing information with HMRC, for paying Inheritance Tax and for distributing the estate. Failure to comply with time limits can result in penalties and/or personal liability.
Ensuring you consider all the taxes due from the estate, not just Inheritance Tax. For example there may also be Income Tax and Capital Gains Tax arising.
Considering whether there are any tax planning opportunities which could be explored.
These lists are designed to set out in broad terms the estate administration process and some key things to thing about, but they are not exhaustive. Precisely what is required will depend on the particular circumstances and details of the estate.