What is Probate? Are you aware of the process and the proposed changes to fees when inheriting an estate? Read our article below, which will inform you about everything you should know about Probate and the changes due to commence in April 2019.
What is the change?
If you administer the estate of someone who has passed away, you could be made to pay £6,000 as the government are changing the way fees work based on the value of the estate.
This process is known as probate and involves the following:
• Gathering the assets of the deceased
• Valuing the estate
• Paying any tax
• Paying outstanding bills
• Distributing the estate according to the will
What are the planned fees?
If the value of the estate before inheritance tax is:
• Up to £50,000 or exempt from a grant of probate – no fee
• £50,000- £300,000 – £250 fee
• £300,000- £500,000 – £750 fee
• £500,000- £1m – £2,500 fee
• £1m- £1.6m – £4,000 fee
• £1.6m- £2m – £5,000 fee
• Above £2m – £6,000 fee
Who will it affect?
If you inherit a property of a lower value, then the new banded structure requires that only those who can afford to pay more inheritance tax will be required to pay more.
The decrease of probate fees that will be due will rise to £50,000, so an extra 25,000 households will not have to pay any fees.
The money that is raised by this change in fees will be used by the government to fund the courts and tribunals service to create a better service.
What is the process of probate?
If you are appointed as an executor in someone’s will, then you will be required to complete several stages before the application for a grant of probate.
You should know that probate can be a long and confusing process if you are carrying it out alone.
If you are dealing with a complexed estate, then you might want to consider hiring a professional to act on your behalf as then you are assured that it is completed correctly.
Do I need to go through probate?
You may not need to go through the probate process as it depends on the estate. So, the first step is to find out what you are required to do.
The process of probate may not be needed if the property of the person that has died had savings, or premium bonds.
If the property was jointly owned, then the property will pass to the surviving owners.
What are the duties of an executor?
If you are an executor then one of your main roles is to work out the value of the estate and report it to HMRC, it is important that the evaluation is accurate as this could result in a fine from HMRC.
You must also find out about any debts or assets the person had by contacting banks, pension providers, lenders and credit card providers.
It is also essential that you know the value of the persons home and possessions, as well as any life insurance payments and certain gifts they made in their lifetime.
How do I apply to probate?
If you are an executor and have a copy of the original will and death certificate, then you can apply for probate online.
You should know that before you can apply you must have estimated and reported the value of the estate to the Revenue.
Do I need to pay inheritance tax?
If inheritance tax is due on the estate, the forms that relate to it need to be sent within a year of the person’s death, and you will have to pay all tax within six months of the death.
There are options so that you can be inheritance tax on certain assets in installments, but once the item is sold the bill must be paid in full.
You do not need to have finished valuing the estate before paying inheritance tax on assets, it is better that you start this as soon as you can, as HMRC will charge interest if you do not pay by the deadline.
Collect the estates assets
If you need to access any financial assets of the person who has died, then you will need to send a copy of the grant of probate to the organisations that hold the assets.
Pay off any debts
You should make sure that all outstanding taxes and debts are paid.
You should notify creditors of the death to prevent any debts arising later on.
Keep estate accounts
It is important that you keep an accurate record throughout the process of the money, possessions and property owned by the person who has died and a record of who it is split between.
This must be approved and signed by you and the main beneficiaries.
Distribute the assets
You can distribute the estate according to will once all the debts and taxes have been paid.
For the estate accounts it is necessary to keep a signed receipt from each beneficiary of the estate when they receive their inheritance.
It is important to make beneficiaries aware that they may have to pay income tax if the asset they inherit generates a form of income.
The estate may also have to complete a trust and estate tax return to report any income it receives while it is being administered.
Overall, if you seek further advice about probate then please read the full article below, or get in touch as we would be happy to help.
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