Preparing your estate for your death can sometimes be a challenging process, but it is important that the right plans and a Will are put in place to ensure your wishes are met.

Taking the time to arrange your affairs in advance of your passing not only makes sure wealth is passed to the right beneficiaries but often also ensures it isn’t heavily taxed.

Managing an estate after your death requires your family or an appointed professional to conduct a process known as probate.

What is probate?

Probate is a legal process that is sometimes required to validate a deceased person’s will in order for their wishes to be carried out by an executor named in the will. The executor is the person responsible for administering the deceased person’s estate, ensuring debts are paid and remaining assets are distributed.

This grants the holder of the grant the power to administer an estate, to make sure all relevant taxes are collected, money owing to creditors is paid, debts owed to the deceased are collected and the remaining assets from the estate are distributed to the relevant beneficiaries.

As specialists in all aspects of taxation, accounts preparation and estate planning, Grunberg & Co. Probate Services are best placed to take care of your probate and estate administration work.

We are one of only a handful of accountancy firms in the UK granted a licence to manage this process.

If you are an existing client of our firm, we will already have an in-depth understanding of your personal and business finances, which means we already hold information that assists in completing the Inheritance Tax Return that is required for making a probate application.

What do I need to consider when creating a Will?

After every significant life event, we advise you to update your Will to avoid any issues with it later in life. This includes after moving house, having children, or entering new relationships. Even if you do not experience a major life event, it is worth reviewing your Will every couple of years to ensure it is up-to-date and reflects your current wishes.

In relation to this, it is also extremely important to create a new will after marriage. Once an individual gets married, their previous Will is then void.

In scenarios where an individual passes away without a Will in place, the laws of intestacy apply.

Therefore, wealth and assets will be distributed according to a rigid and commonly less tax-efficient formula, which could even see former spouses or estranged family members benefit from your estate against your wishes.

It is also important to consider what you leave and to whom. This is vital as it makes a significant difference to Inheritance Tax (IHT) bills – we advise that you always have IHT in mind when drafting a will.

How are IHT bills calculated?

An estate is liable to IHT where the following conditions are met:

• Its value exceeds the applicable nil rate band in the tax year in which the deceased died (that is, from 6 April in one calendar year to 5 April in the following calendar year); and
• The excess, or part of it, is not exempt from IHT. The exemption from IHT applies where the excess, or part of it, passes to:
• the spouse or civil partner of the deceased;
• a charity; or
• Another qualifying body recognised by HMRC as exempt from IHT.

IHT is charged at the following rates:

• Below the nil rate band allowance, the rate of tax is 0 per cent.
• On the balance, the rate of tax is:
• 20 per cent for chargeable lifetime gifts;
• 40 per cent on estates on death or 36 per cent where 10 per cent or more of the net estate is given to charity.

An estate or that part of it that is within the nil rate band (currently £325,000 per person) is not charged IHT. However, the nil rate band or part of it may be not available to the estate if the deceased used it up during their lifetime, for example by making:

• Gifts or transfers of value to trusts and companies which are chargeable to IHT.
• Potentially exempt transfer (PET) which have not become exempt transfers because the deceased has not survived seven years after making the transfers.

Any part of an estate that passes to a spouse or civil partner is exempt from IHT provided that both parties were domiciled or deemed domiciled in the UK or neither were domiciled nor deemed domiciled in the UK.

In addition to a deceased’s own nil rate band, where the deceased died on or after 9 October 2007, having survived their spouse or civil partner, the estate may take advantage of the unused percentage of the previously deceased spouse’s or civil partner’s nil rate band. This combined allowance will total £650,000 across both estates.

Individuals who die on or after 6 April 2017 can also benefit from an additional main residence nil rate band (residence nil rate band (RNRB)) if they leave their main residence to their direct descendants. The current RNRB is £175,000 and can be transferred to a surviving spouse or civil partner, meaning that a couple can pass on up to £1 million tax-free.

The RNRB also applies to estates where the deceased downsized by moving to less valuable property or ceased to own property altogether, and where their direct descendants inherit other assets equivalent to the value of the residence at the date of sale.

In some cases, if IHT is payable on the estate, or it is just below the IHT threshold, it is advisable to use a chartered surveyor to value land and buildings and a suitably qualified valuation professional to value unquoted shares.

We also highly recommend using a professional accountant for all your probate matters as they understand complex financial tax matters like these.

How can we help you?

• Estate administration – Assisting the executors or administrators to obtain the “grant” to deal with the deceased’s estate.
• Identifying the assets and liabilities of the Estate – Including bank accounts, pensions, properties, shareholdings, taxes, credit cards, insurance, utilities, etc.
• Valuing the assets of the Estate – Valuing assets in accordance with the Inheritance Tax (IHT) Act 1984, and claiming all reliefs (spouse exemption, charitable gifts, etc.) and transferable nil rate band if applicable.
• Completing the Statement of Truth and IHT forms – This will include either IHT400 or IHT205 depending upon whether the estate is excepted.
• Obtaining a grant of probate – Correspondence with HM Revenue & Customs (HMRC) and Probate Office.
• Estate accounts preparation – Drawing up financial statements showing incoming and outgoing of the Estate and ensuring that assets are distributed in accordance with the Will (or as deemed by law where there isn’t a Will).
• Income tax returns – A Self-Assessment tax return may be required if the deceased had income from sources such as self-employment, interest, rental, overseas income or had capital gains or higher rate tax liability.
• Administration period returns– During the administration period, if income and capital gains arise, these have to be reported to HMRC and tax paid. The exception is if the assets are assigned to the beneficiaries then they will have to report the income and capital gains on their tax returns.

At Grunberg & Co. we can help you put plans in place to minimise IHT including a full Will review, advice on setting up a trust, identifying assets that qualify for business or agricultural property relief and much more.

For help or advice on related matters, please contact us today.