You may not pay much attention to the probate process during later life planning. Probate takes place after you pass away and it is a key part of administering your estate. Understanding how it works can help you take steps to make it easier for your loved ones to manage the process through.
What Is Probate?
Probate is a legal document needed for approximately 50% of the people who pass away in the UK. This document shows that executors have the authority to distribute your estate to your beneficiaries. Once the executor has the document, often called a grant of probate, they can sell property, pay off debts and close accounts.
The probate process can be lengthy, often taking around nine months to settle completely. It is usually needed if the total value of an estate is more than £10,000 and if the estate includes solely-owned assets. Some banks can release money without needing a grant of probate, ranging between £5 and £50,000, as different banks have varying rules on how much they can give. Jointly owned assets, such as bank accounts or properties shared between spouses, automatically pass to the surviving co-owner and do not require probate to administer.
Executors cannot distribute the estate’s assets to the beneficiaries without probate. Executors will not have the legal right to close bank accounts or sell property, debts will not be able to be settled, and dependents will not receive any assets or money they are entitled to.
The Probate Process
The probate process can be broken down into several steps:
- Check whether probate is necessary – the estate’s executor will check if probate is necessary to administer the estate.
- Gather information – if probate is necessary, the executor will gather information about the estate, including what assets are to be distributed and to whom, if any debts are remaining, and what gifts have been given out in the past seven years.
- Apply for probate – once the information about the estate has been gathered, the executor will apply for probate and fill out a form for Inheritance Tax purposes. It takes approximately three to six weeks for a grant of probate to be approved, but this can be longer due to high volumes of applications or mistakes in the form.
- Administer the estate – the final step in the probate process is administering the estate. This can take around three to six months and includes tasks such as claiming on any life insurance policies, distributing gifts to the beneficiaries and closing various bank accounts.
Probate also comes with fees that are payable depending on the size of your estate. It costs £215 in England and Wales, and that fee is waived if the estate is valued at under £5,000. Extra copies of the grant of probate cost £1.50 each and can smooth over the process if different banks require it.
Problems With the Probate Process
Several common issues can arise within the probate process, such as:
- Problems with executors – issues can arise with executors during the probate process, such as appointed executors not wanting to act in their roles, failing to fulfil their duties, or a family dispute making it difficult for executors to be subjective.
- Problems with beneficiaries – this can include the beneficiaries being bankrupt or missing or people left out of the Will disputing it.
- Problems with foreign property – more and more people own foreign property, such as holiday homes. This can be difficult to distribute after death, as the property is subject to the country’s rules where it is situated, which can extend the probate process.
- Problems with the Will – before executors can begin to administer the estate, they must have the correct copy of the Will. If they cannot find the original or the Will they have is invalid, named beneficiaries may not get the inheritance they are entitled to, leading to lengthy inheritance disputes.
To smooth the probate process for your loved ones in the future, ensure that your Will is up to date and that your executors know where to access a copy. You can also appoint a professional executor for your estate to take a burden off your loved ones during a difficult time.
When it comes to distributing foreign property in your Will, you can smooth the probate process by having multiple Wills, one for each jurisdiction that you own property in. Although this can seem complex and be expensive initially, it can save a lot of time and money in the future.
Letters of Administration
It is easy to mistake letters of administration for probate, as they effectively do the same job, but they are very different. A grant of letters of administration is another official document that gives executors the right to administer someone’s estate. However, letters of administration are only needed when a person passes away without a Will, also known as dying intestate.
Letters of administration may also be needed if the executors of a Will cannot deal with the estate on their own. This would be known as a grant of letters of administration with Will annexed.
Conclusion
Although the probate process is not technically part of the estate planning process, it is still good to think about it when creating your Will. Probate can be long and complex, but you can smooth the road for your loved ones with a well written Will and by ensuring your executors will be able to complete the job.
If you want to create a strong Will, contact The Planning Bee today. Our team is available to help you with all of your estate planning needs. Get in touch to arrange a free, no-obligation consultation.