Dealing with the financial affairs of someone who has passed can be a challenging process, and there are specific legal and financial steps people need to take following a bereavement. Here, Amanda Simmonds, Director in Private Wealth and Succession shares a guide on handling inheritance and navigating common pitfalls.

Wills and estate set up

Some of the common mistakes in DIY or outdated Wills include vague and ambiguous wording, missing residuary clauses, incorrect witnessing and hand-written amendments. These drafting errors can create uncertainty and disputes between beneficiaries and could result in part of the estate passing under intestacy rules or invalidating a Will entirely.

Having a professionally drafted Will is one of the most important steps anyone can take. A solicitor or suitably qualified specialist, such as a STEP member, will understand any potential legal pitfalls and can ensure the Will accurately reflects your intentions. They will also have professional indemnity insurance in the unlikely event that something goes wrong.

Making a Will shouldn’t be a one-off exercise and it should be reviewed every five years to check it is not outdated.  It should also be reviewed whenever a significant life change has taken place, such as marriage, divorce, the death of a beneficiary or a substantial change in the value of your estate.

The Executor’s Role and Liability

An executor is the person named in the Will who is legally responsible for administering the deceased person’s estate. Their role involves identifying and securing the assets of the estate, establishing and paying any debts and tax due, applying for probate where required, and ultimately distributing the remaining assets of the estate to the beneficiaries named in the Will.

The immediate priorities include registering the death, obtaining death certificates and locating the original Will to confirm who has been appointed as executor. This is especially important in circumstances where more than one executor has been appointed, as executors must act unanimously throughout the process. Once you have started acting as an executor stepping away can become considerably more difficult, so it is important to understand the responsibility before beginning.

One of the legal liabilities that family executors often overlook is that they have strict legal and fiduciary duties and can potentially become personally liable when mistakes cause a financial loss. One of the biggest risks is distributing an estate too early, only for an unexpected tax bill or creditor to emerge afterwards. Executors can take steps to protect themselves against unknown creditors, including placing statutory notices and allowing the required period for claims before distributing assets.

Navigating probate rules and bottlenecks

Probate is the word used to describe the legal and financial processes involved in dealing with an estate. It is also the process of proving a Will is valid and confirming who is entitled to administer the estate.  At the end of this process, a grant of probate document is issued which confirms the person’s death and who is entitled to collect the assets of the estate.  The grant is the authority that banks, building societies and other investment managers need before releasing the assets they hold to the executor.

To apply for probate, executors must start with registering the death and locating the Will. They then need to identify and value the deceased’s assets and liabilities as at the date of death. This is when inheritance tax must be considered, and if relevant, a return must be prepared and submitted to HMRC, and any tax due must be paid. It’s important to note that you cannot lodge the probate application until inheritance tax is paid, which can often take 3 to 4 weeks. If there are errors in the inheritance tax return, then the time to issue the code can double, which will lead to a delay in obtaining probate.

Preparation and good communication can make a significant difference to the efficiency of the probate process. Executors need a comprehensive picture of the deceased’s financial affairs, so family members should provide relevant information and paperwork as quickly as possible. This includes details of property, savings, investments and debts, but also information about significant gifts made during the deceased’s lifetime, particularly those made within the seven years before death, as these may be relevant when calculating inheritance tax. 

Non-family and unmarried beneficiaries

There is no such thing in English law as a common law spouse so unlike assets passing between spouses or civil partners, gifts between unmarried partners don’t generally benefit from the inheritance tax spouse exemption, regardless of how long a couple has lived together. This can lead to assets having to be sold to meet IHT on the first death, which will deplete the assets the surviving partner needs to live on. The same applies to unmarried siblings living together on the first death.

Blended families also require careful planning. A Will should make absolutely clear who is intended to benefit rather than relying on assumptions about terms such as “children”. Difficulties can also arise with Charities whose trustees have a duty to protect the charity’s interests and maximise the value of funds left to it. As a result, they may scrutinise or query administration costs incurred by the executor.

If a family contests the Will the probate process can stall. A dispute can significantly delay the administration of an estate, and in particularly contentious cases, the probate process can effectively grind to a halt while the issues are resolved.

Managing disputes and practical advice

Communication during your lifetime can be one of the most effective ways of reducing the likelihood of disputes after your death. Be open with your family about the contents of your Will and why you have made the gifts in it the way you have. Explain why you think it is fair, so the family knows your thought processes.

Executors should be prepared for the administration of an estate to take time, even when everything is progressing exactly as it should. There are numerous stages involved in identifying and valuing assets, establishing liabilities, dealing with inheritance tax, obtaining probate, collecting assets and eventually distributing them to beneficiaries. Some of these processes depend on third parties such as banks, investment providers, HMRC and the Probate Registry and cannot simply be accelerated by the executor.

If you would like support in preparing a will or require assistance with applications for probate and dealing with the necessary HMRC tax forms and the administration of many varied estates, we’re here to help. Get in touch with Amanda Simmonds at amandasimmonds@schofieldsweeney.co.uk.