My great aunt died at the end of last year and my family and I are still desperately trying to execute her will. However, grants of probate approvals are currently being delayed by up to three months due to coronavirus. I am relying on the inheritance money to pay for my eldest daughter’s university fees. As a family, are we liable and expected to pay for any of my great aunt’s outstanding bills? What other problems should we be aware of? Is anything being done to bypass the current delays to grants of probate?
Mandy Casavant, a senior associate in the private client team at Royds Withy King, says the Covid-19 pandemic has seen a significant slowdown in the probate process, both in the interplay between the two bodies that manage probate applications, HM Revenue & Customs and District Probate Registries, and in the various banks and financial institutions that hold assets of the deceased.
The process for applying for a grant of probate relies on you identifying what is in your great aunt’s estate, declaring this to HMRC via an IHT400 form and arranging for the estate to settle any inheritance tax due. Tax will be due six months after the end of the month in which death occurred and has to be paid before control of the estate’s assets can be obtained. Delays are compounded as probate follows a rigid process.
Banks, building societies, estate agents, accountants and other asset holders may themselves be facing delays in obtaining the information you need to present to HMRC.
HMRC is working hard to process probate applications, but many of its agents are now working remotely, adding further delays. Getting the tax released from asset holders, or loaned by beneficiaries and executors, is also taking time with remote ID verification a particular problem.
District Probate Registries have to wait for notification from HMRC that enough money has been paid. This department is dealing with high volumes of applications, adding yet more delays. The courts are then taking up to nine weeks to review and confirm the grant of probate, and only when you have that are you able to go back to asset holders and seek release of the funds.
This process can, from the date of death, take upwards of seven months when running smoothly. It will be longer if problems are encountered at any stage. There are a few things you can do to speed the process up.
Arrange formal valuations of assets as early as possible, and have all the documentation you need to hand, including the will, information on the predeceased spouse’s estate, marriage date, death certificates, national insurance number, and any information on lifetime gifting.
We would also recommend using the online application process whenever possible as this does speed the process up. And keep a diary of the dates on which actions were taken so as to record progress to update interested parties.
Finally, the estate itself is usually liable for the inheritance tax, liabilities and administration expenses. However, without access to funds people are left waiting for their money for a long period. Most commercial institutions are accustomed to this. Keeping everyone informed is key.
Lynne Rowland, partner at law firm Moore Kingston Smith, says your concerns are understandable, as an executor has legal, tax and administrative responsibilities and you must show good cause for delays to avoid being held personally liable for any interest on unpaid debts or any losses incurred by the estate.
There is a defined process to follow. You must identify all assets, then gather them in to enable all liabilities to be settled before finally you are in a position to distribute them in accordance with the terms of the will.
The “Tell us Once” service is a great time saver in advising government departments of a death, but you must also inform all relevant banks and financial institutions so that you can obtain valuations of assets owned by your great-aunt at date of death, along with evidence of any liabilities. Banks will usually release funds to pay inheritance tax liabilities and funeral expenses only. You should also notify all creditors and agree to settle debts once probate is granted, although creditors usually continue to charge interest.
Most financial institutions have set an amount below which they will transfer funds without requiring sight of the grant of probate, usually in the region of £5,000 to £15,000. Given the current difficulties, some financial institutions have increased thresholds to £80,000. While this may help with paying liabilities, you must keep a proper account of the funds, and remember that any liability to HMRC must be paid in priority to other debts.
You had six months from date of death in which to report the estate for inheritance tax and settle any IHT due to avoid interest and penalties. Depending on the type of assets held, it may be possible to pay some of the tax in annual instalments. However, unless the tax is paid or a special arrangement agreed with HMRC, you will not receive the interim clearance required to apply for probate.
There are also reliefs against inheritance tax that you can claim against any losses on the sale of shares and immovable property in the estate. However these are subject to a strict timeframe, with losses on shares only available for a year following the death.
You will usually need probate to enable the disposal or transfer of assets in the estate. The courts and tribunal service has introduced a new online service which the government hopes will alleviate the current delays and streamline the application process.
As long as you have done everything you can to deal with the estate in a timely fashion, you will not be expected to settle your great-aunt’s outstanding bills from personal funds. However, as you are approaching the anniversary of your great aunt’s death and still haven’t obtained probate, it might be worth getting some support from a professional.
The opinions in this column are intended for general information purposes only and should not be used as a substitute for professional advice. The Financial Times Ltd and the authors are not responsible for any direct or indirect result arising from any reliance placed on replies, including any loss, and exclude liability to the full extent.
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