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DIY Probate Could Come Back to Bite

Probate is a vitally important part of the Will process

Probate is a vitally important part of the Will process.  This is dealing with the valued, and often treasured, possessions, property and money (assets) left by the person who has died.  Attempting to deal with probate without involving solicitors is a tempting proposition for many personal representatives.  They can be either the person named in the will, or the person entitled to administer the estate where there is no will.  That personal representative of an estate may believe that they are able to deal with the administration of an estate and avoid legal fees.  Whilst this may be true in straightforward cases, where there are more complex affairs to deal with or inheritance tax to pay, a DIY approach can represent a false economy.

Administering an estate can be a daunting task.  It often involves extensive enquiries into debts, assets, pensions, lifetime gifts and the deceased’s income tax affairs. Even with the best intentions, a lack of knowledge of the practical steps required and the legal intricacies can lead to unnecessary problems, costs and mistakes.

Understand the risks of DIY probate before taking the plunge

The process can take the form of a Grant of Probate (where the deceased had a will) or Grant of Letters of Administration (where the deceased died without a will).  Probate is likely to be needed where the deceased:

  • held funds in a bank account of building society (usually over £25,000);
  • owned stocks and shares;
  • owned a property;
  • had an interest in a trust;
  • owned a business or farm land; or
  • owned assets abroad.
  • benefits are payable from a life insurance policy or a pension

Professional and lay (unqualified) executors have the same duties to the estate’s beneficiaries and, where tax is payable, to HMRC.  A professional can draw on years of training and practical experience in relation to succession and tax law.  This is unlikely to be the case for a lay executor.

Instructing a solicitor to deal with the probate and administration of an estate is wise

Common mistakes of DIY probate

  • Undervaluing the estate for Inheritance Tax purposes and incurring unnecessary HMRC interest and penalty payments;
  • overvaluing estate assets (particularly the deceased’s home) and unnecessarily paying too much inheritance tax;
  • not being able to identify or locate all assets;
  • all of the beneficiaries who are entitled to inherit are not recognised;
  • failing to pay Inheritance Tax within the strict time deadlines;
  • does not implement a trust contained in the Will;
  • paying too much tax or incurring unnecessary HMRC interest and penalty payments by failing to identify, mitigating tax liabilities where appropriate; or
  • non-payment of all the deceased’s debts, where an estate is insolvent or debts in the strict order required by law.

For instance, take this example of the strict legal responsibilities placed on a personal representative.  The recent unfortunate case of an executor acting without legal representation: Harris v HMRC [2018] UKFTT 204.  Here, the executor distributed the estate to its beneficiaries without paying circa £340,000 of inheritance tax due to HMRC.  As a result the executor was unable to recover the funds from the beneficiaries.  They were therefore held to be personally liable for the sum due to HMRC.

Be aware of inheritance tax

Where an estate is taxable, the responsibility and risk to personal representatives increase substantially.  Due to the recent changes to inheritance tax law an additional inheritance tax allowance, known as the residence nil rate band, makes it very easy to be overlooked by a personal representative.  The cost to the estate in the loss inheritance tax relief alone could be as much as £140,000.

There are many reasons for taking the DIY route, the main one being to save money.  However, failure to follow the correct procedures could cost you dearly further down the line.

Instructing a solicitor to deal with the probate and administration of an estate is a wise investment from both an emotional and financial standpoint.  It could save you greatly in the long run.

Our probate team are all qualified solicitors and legal executives with many years’ experience.  They are experts in dealing with not only the application process, but also with taxation issues, HMRC and other third parties.

Get in touch with us to ensure you are making an informed decision.  We can discuss all of your options so that you can move forwards with peace of mind.

Give us a call on 01444 459 555

Drop us an email – enquiries@parfittcresswell.com

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Contact us on 0800 999 4437

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