What to do when someone dies – your financial obligations

Handling the estate 

With the above steps underway, the executors must turn their attention to the estate. 

• Establish the extent of the estate, gathering details of all assets and liabilities of the deceased. 
  • Jointly held assets will generally pass automatically outside of the will and Probate, which is the process of evaluating and organising a deceased person’s estate. 
  • Other assets will rest in the estate until sold or transferred under the terms of the will.
• Seek professional legal assistance where overseas assets form part of the estate as there are different rules governing their transmission, which can often be a difficult hurdle in this process. 

Inheritance Tax (IHT)

Once details of the assets and liabilities of the estate have been established, the next step is to ascertain the value of the overall estate for IHT purposes. We can help you do this and have contacts who can assist with any valuations required.  Often the most difficult figure to ascertain is the total of gifts or other transfers made in the seven-year period prior to date of death. Much depends on the accuracy of records kept by the deceased, whether a professional adviser was used etc. 

If it’s apparent that IHT will be payable, you should bear in mind two important deadlines: 

• The IHT forms must be submitted within one year of death. 
• The first payment on account of IHT should be paid by the end of the sixth month after date of death, whether or not you have finished valuing the estate at that point.

An application for an IHT reference number will need to be made to HMRC at least three weeks before a payment becomes due. Given that IHT needs to be paid prior to probate being obtained, payment can be made directly to HMRC from a bank or other investment account of the deceased.

If you feel this is something that you need support with, we’re more than happy to help. Many of our clients seek help at this step, as the executors are held responsible for the accuracy of the information contained within the IHT forms. A penalty may be incurred if inaccurate information is included. 

Applying for probate

Once the value of the estate has been agreed, reported to HMRC and at least some of the IHT paid, the next step is the application for probate.

As an executor, you have the ability to apply for probate online, but the deceased must also have lived in England or Wales most of the time to use this service. You’ll need to send the original will, with any codicils (an addition or supplement that explains, modifies or revokes a will or part of one), and original death certificate by post in support of your online application. 

If there is no will, or none of the named executors can act, then the next of kin should apply to the probate registry for Letters of Administration. Further details regarding the application for probate, where to send documents and fees involved can be found on the government website. 

We can also assist you with this and find many people prefer to get professional help.

Personal tax 

Review the deceased’s personal tax affairs to date of death: 

• If they were within Self Assessment, work with us, or the deceased’s tax adviser, to file the tax return to date of death and the earlier year if not completed.
• For those not within Self Assessment, HMRC should provide the necessary tax calculation, as there’s a simple automated process in place. Once HMRC has received all the relevant pay and tax figures for the year, a calculation will be sent to the executors reconciling the final position but this should be checked.
• Any income tax or capital gains tax liability is a debt of the estate. Any tax repayment due to the deceased will be an asset.

Estate administration

Once probate has been granted, the executors must turn their attention to settling all debts of the estate and distributing assets remaining in accordance with the will or the rules of intestacy (rules that apply to someone without a will). Key points to consider here are:

• Ensuring all known beneficiaries are taken account of. It may be necessary to seek professional assistance in finding beneficiaries or guarantee that sufficient notice has been given in case beneficiaries later come forward. 
• Specific legacies must be fulfilled before considering the residuary estate. 
• Sometimes difficulties arise due to complex family relationships or possible disputes over the will itself or certain assets within the estate. Executors may need to seek legal advice to protect themselves.
• There is a two-year window in which an entitlement from an estate may be varied to accommodate the wishes or needs of a beneficiary, or to distribute the estate in a more tax efficient manner. We can help you review you situation and whether this is right for you.
• There are income tax and capital gains tax mitigation opportunities during the estate administration period, such as timing distributions or transfers of assets prior to sale to make use of any losses or legatees non-UK tax status.

Dealing with the estate may be a lengthy process, but once the estate has been fully distributed, the executors should close any accounts opened in the process and their work is done. In some situations, indemnities should be obtained.

How we can help

Rely on our licensed experts for all your probate and estate administration needs, with a single point of contact to guide you through the whole process. From immediate advice on filing the inheritance tax form and applying for the grant of probate, to estate administration and dealing with any accounts and tax reporting. We can also advise on trusts in wills and UK probate with foreign assets. For legal advice, we can recommend someone from our trusted network of advisers, who is best suited to you and your requirements.

For professional advice tailored to your unique circumstances, fill out the form below and one of our experts will be in touch to discuss your requirements and how we can help.