In these tough economic times many of us are looking to save money. However, in terms of administering an estate, saving money now can cost in the long term. Karen Bacon, head of our wills and probate team, explains more.
The number of people dealing with the administration of a deceased person’s estate without professional help has increased in the past few years. With decreasing property prices, people have looked for ways to increase the amount of the estate available to be paid to the beneficiaries. However, there are many reasons to be cautious of taking this “DIY” approach and benefits to instructing a solicitor to deal with the estate.
The first thing you need to enable you to sort out the deceased person’s affairs is a legal document called a Grant of Probate. Solicitors are able to apply for a Grant on behalf of their clients without them having to go through the process of attending an interview with the Probate Registry.
A solicitor can often advise ways in which money can be saved, for example by reducing the inheritance tax due on the estate. If the person who died was a widow or widower then the nil rate allowance (the rate below which no tax is due – currently £325,000) could potentially be doubled to £650,000. At Steeles Law, we recently helped a client claim the unused nil rate allowance from her husband’s first wife’s estate. She had died in the 1980s and there was little evidence as to how her estate had been distributed. However, we gathered sufficient information to persuade HM Revenue & Customs to allow the 100% increase in the nil rate allowance. This saved our client a tax bill of £130,000!
Since 2010, executors have been liable for capital gains tax at 28% on increases in the value of assets between the date of death and the date of sale. We can advise on the best way to deal with the estate to avoid or reduce the tax liability and can also assist you with carrying out variations to the distribution of the estate to take advantage of tax rules. Similarly, we can assist with transferring property to beneficiaries and will identify any associated problems that may arise.
Finally, many Wills include provisions to set up trusts – either life interest trusts or discretionary trusts, which were popular before October 2007 and used to save inheritance tax. If these trusts are not properly dealt with during the administration of the estate, then they can cause significant problems at a later date.
A typical example is where Mr Smith dies and his Will contains a discretionary trust for his wife and children. The trust is no longer required in order to save inheritance tax so his family simply ignores it and distributes the estate as though the trust had not been included in the Will. When Mrs Smith dies her executors will encounter difficulties and may find that Mrs Smith cannot claim the double inheritance tax allowance. The best solution is to get expert advice at the time and not ignore something in the Will that is not clear to you.
At Steeles Law, our wills and probate team can offer a range of probate services – from an initial fixed fee interview to discuss what steps need to be taken, to the full administration of an estate. We can also advise on all types of trusts and estate planning.
We welcome the news that the Legal Services Board will recommend to the Lord Chancellor that estate administration and probate should only be carried out by regulated legal professionals. This will give greater protection to consumers who seek help with the administration of a deceased person’s estate from someone other than a solicitor, but there are no safeguards for those seeking to handle administration of a deceased person’s estate without any professional help
For further information, please contact Karen Bacon on 01379 652141 or [email protected].
