When a person passes away it is necessary for somebody to organise their affairs. This means ensuring that their estate is valued, their debts paid, and ultimately, any money left over is distributed according to the deceased person’s wishes.
What does probate mean?
The process of administering the deceased person’s estate is known as probate. This involves several steps, including valuing the estate, paying off their debts such as mortgages, then distributing the leftover money and assets according to their will.
When is probate required?
Probate would normally be required for the administration of the estate of someone who has passed away. There are probate solicitors or specialists on hand to help you should you need them. Probate will normally be required if you are:
- Looking into an estate administration where there is a dispute over any aspect and there are legal proceedings.
- Looking into an estate where the amount of money in financial services is greater than the probate limit – this varies between different banks and financial institutions.
- Distributing the assets and property of a person who has passed away.
- Dealing with the stocks or shares of a person.
What is a Grant of Probate?
Before you can begin to look at the deceased person’s bank account(s) you will need to have a Grant of Probate. This is a legal document that allows you to have the authority to have access to their bank account. A Grant of Probate is obtained from the Probate Registry.
The Grant of Probate is issued for estates usually over £5,000, but this threshold can vary according to the bank or financial institution, or if you have a property to sell.
What is probate used for?
Probate is the name of the grant that is given to allow you to work on the estate of the person who has passed away. It is required for you to be able to access their bank account, pay off their mortgage, any other debts, and sell their property.
When is probate not necessary?
Although much of the time probate will be necessary, there are some occasions where it is not. These occasions can include:
- If the deceased has a small estate – usually with less than £5,000 in their personal accounts – usually with no shares, land, or property.
- If the person owns their assets and property jointly with another person – often a husband, wife, or partner. In this case, the assets and property will pass straight onto them. The death certificate should be passed on to the HM Land Registry so that the legal title to the property can be updated.
- If the person was insolvent – the amount of money that they owed is greater than the amount that they have to distribute, leaving no money left over in the end.
- If the deceased has an insurance policy in the form of a trust. In this case, the trustees should provide the death certificate and a copy of the policy to the insurance company who will then pay them.
Frequently asked questions
Do I need to apply for probate if there is a will?
Although you don’t necessarily need probate if there is a will, in most cases, even if there is a will, probate will still be needed.
If it is the case that a will has been left, you will need a ‘grant of probate’ and if no will has been left, you will get ‘grant of letters of administration’. They both effectively do the same thing.
Do I need probate for pension funds?
If the person who has passed away has a pension, the death certificate and will should be provided to the pension company so that they can stop sending them money. They will then advise you what will happen with the funds from the pension. Depending on this, you may or may not require a probate. The three most common circumstances are:
- The payments may just stop. In this case, no probate is needed.
- The pension could be transferred directly to the deceased person’s partner or spouse, in which case, no probate is needed.
- A lump sum of the funds could be paid out. A probate may be needed in this case, depending on how much the lump sum is and how it affects the rest of the estate.
Do I need probate for life insurance payments?
If the deceased person had a life insurance policy, the need for probate depends on the policy.
If the payment beneficiary has been named, the money will go straight to them and no probate is required. In this case, the beneficiaries should file a claim with the insurance company along with the death certificate. It will normally take between about 1 and 3 months for the money to be paid out.
If, however, no beneficiary has been named, the money will go directly into the deceased person’s estate and probate may be needed depending on the amount of money that it is and how it affects the estate.
Do I need probate where the deceased had foreign assets?
If the deceased person has assets held in foreign countries, the process can be more complicated.
Different countries have different laws, so if this is the case it is recommended that you get advice from legal services in the jurisdiction of where the assets are held to ensure that you are acting within the law.
Solicitors in the UK can give you advice on how to do this.
Do I need probate to access funds held by a business?
If the deceased person was a business’s owner, partner, or director, the process can be more complicated. It is recommended that in these circumstances, you speak to a solicitor.
Do I need probate where the deceased was the beneficiary of a trust?
When it comes to trusts, different trusts have different rules, some meaning that probate is required and others not. It is, therefore, recommended that you speak to a solicitor if they were a beneficiary of a trust.
Do I need probate where a trust is established under the terms of the will?
Some people set up a trust as part of their will and there are a number of reasons why they choose to do this. Some of these reasons include:
- Protecting assets – certain assets that they wish to ensure will go to particular people.
- Protecting beneficiaries – beneficiaries such as children or disabled people who might be unable to manage their own assets at the time.
- Retaining control – to be able to transfer assets out of personal ownership but also retain a degree of control.
- To be able to treat capital and income differently – enabling different beneficiaries to be treated differently – for example, a spouse could be treated differently to other beneficiaries.
- To reduce the tax paid.
- To avoid the need for probate transferring.
Administering the estate when there is a trust involved can be complex, and sometimes probate is required and other times it is not. It is, therefore, recommended that you discuss the situation with a solicitor who can advise you on your obligations.
What happens when probate is not needed?
If you need a probate, it can take between about 6 and 12 months for the estate to be finished, including selling property and closing bank accounts.
If, however, you do not need probate, it is still likely that you will need to show the death certificate and proof of identity before the bank or financial institution allows you to access the bank account and funds of the deceased person.
If the deceased person left a will, the executor who is named in the will has the responsibility for administering the assets of the estate.
If, however, a will has not been left, the responsibility of the administration of the estate is down to the beneficiaries under the intestacy rules.
Do I need to pay inheritance tax when probate is not required?
Whether or not you need to have probate does not have an impact on whether you need to pay inheritance tax. Inheritance tax is paid to HMRC based on the value of the estate. There are some circumstances, however, when inheritance tax does not need to be paid – such as if the estate passes to the deceased person’s spouse when probate is also not required.
It is essential that a Grant of Probate is obtained if it is needed. If you delay or don’t obtain one when it is required, there can be several consequences. These include:
- Inheritance tax must be paid to HMRC within 6 months of the death. If this is delayed, you can be liable to pay interest and additional penalties.
- You have a legal requirement to advise banks of a person’s death.
- The payment of beneficiaries will be delayed, causing ill-feeling, and ultimately, potentially give beneficiaries the grounds to remove you as executor
Last reviewed on 11/07/23 by Dawn Cash who is Head of Private Client and an Associate Director