The ins and outs of estate administration: a simplified guide

Death comes to us all. It is the unavoidable, inescapable, inevitable and immutable truth that caps every life and every living thing. Most people hope to leave behind some cherished memories among their family members and friends after they have passed. Many hope to leave legacies, which may consist of their lifetime achievements or wealth to pass down to future generations.

For sure, though, the vast majority of people will leave behind property, assets, money, possessions, debts and tax affairs, all of which must be dealt with by somebody else.

Personal representatives

When a person dies, all their assets and liabilities pass automatically to their personal representatives who hold them all on trust, pending distribution to beneficiaries. If the dead person, known as the deceased, left a valid Will then the personal representatives appointed under that will are known as ‘executors’. If the deceased did not leave a valid Will, then they are considered to have died ‘intestate’ and the rules of intestacy apply. These rules set out a strict order as to which family members are to be appointed as personal representatives, known as ‘administrators’ in cases of intestacy.

Valuing the estate

Regardless of whether the deceased left a valid Will or not, the first job of the personal representatives is to calculate the net value of the deceased’s estate. This entails ascertaining the value of all the deceased’s assets, including any real property, bank accounts, shares, business interests, investments, personal chattels (such as jewellery, works of art, antiques, furniture), savings and digital assets. Also, things like any debts owed to the deceased, unpaid pension entitlement or the proceeds of any insurance policies. The aggregate value of these assets is the gross value of the estate.

Then they must calculate the total amount of liabilities which is usually things like debts owed by the deceased, any outstanding mortgages or unpaid bills. The aggregate amount of these liabilities must then be deducted from the gross value of the estate to arrive at a figure for the net estate. The value of the net estate will determine whether or not Inheritance Tax is chargeable on the estate.

Applying for the Grant

Once the personal representatives have calculated the net estate and ascertained whether or not there is any tax to pay, they must now seek the authority of a court order to deal with the estate.

If the deceased left a valid Will, then the executors must apply for an order known as a ‘grant of probate’. This is known as ‘proving the Will’. If the court is satisfied that the Will is valid then it is considered ‘proven’ and the court will issue the executors with a document which constitutes the grant of probate.

If the deceased died intestate, then the administrators must also apply to the court, who must be satisfied that the deceased died intestate and that the application is being made by the person(s) who are entitled to make it under the intestacy rules. If so satisfied, the court will issue a document known as a ‘grant of letters of administration’.

Collecting in the assets

Once the appropriate grant has been obtained, the executors or the administrators now have the legal authority to deal with the estate.

For the most part, this will entail liquidating, or selling, the assets of the estate and keeping account of the cash proceeds. All the deceased’s bank accounts must be closed and the balances collected in as a part of the estate. Out of these proceeds, the executors or administrators must pay all the debts owed by the estate.

However, assets are not always sold. If the deceased left a valid Will in which they left a specific gift to a particular beneficiary, e.g., a painting or an item of jewellery, then this gift can be formally transferred as is to the named beneficiary. On an intestacy, there are no such specific gifts, so all assets are generally liquidated.

Distribution of the estate

This is usually the final stage of the probate process. Once all the assets of the estate have been collected in or liquidated, the remaining duty of the executors or administrators is to distribute the net proceeds of the estate to the beneficiaries. In the case of executors, they must distribute in accordance with the wishes of the deceased as expressed in the Will and if administrators, the distribution must be carried out in accordance with the rules of intestacy which sets out a strict order as to which of the deceased’s surviving family members inherit.

If the deceased’s total gross assets amount to less than £5,000 in value then that is known as an ‘exempt estate’ and there is no need to apply for any grant. If the estate is not exempt, then it is wise for the personal representatives to appoint a solicitor to advise them and act on their behalf. The legal estate administration fees are usually paid from the net estate.

For further information and trusted legal advice regarding Wills and Probate, get in touch with us at Carlsons Solicitors.