Dealing with the administration of Estates
When a person dies, the estate they leave behind will need to be administered. ‘Estate’ broadly means money or property belonging to the deceased.
What is meant by ‘administering an estate’?
This is the process by which the deceased person’s assets are collected in, liabilities or debts paid, gifts left in a Will are dealt with and the remaining monies paid in accordance with the Will or under the Intestacy Rules (if the deceased did not leave a Will).
It is the responsibility of the Personal Representative to ensure that this happens. If the Personal Representative does not act correctly in administering the estate, then they can be made personally responsible to put right any mistakes. Acting as a Personal Representative can be burdensome and time-consuming. Seeking advice at an early stage is advised.
An intestacy occurs if the deceased has not made a Will or if their Will is not valid. The Intestacy Rules dictate to whom the deceased’s estate will be paid to. There can be serious unintended consequences, such as monies passing to relatives the deceased has never met, or if there are no relatives, the estate passes to the Crown.
What is a Personal Representative?
A Personal Representative is known as an ‘Executor’ where there is a Will and an ‘Administrator’ where there is no Will or no valid appointment of Executors in a Will.
When a person dies leaving a Will, their Executors will deal with the administration of the estate. A common question is why is a Grant of Probate needed when the deceased has made a Will? Making a Will is only part of the process. A Will states the Testator’s wishes regarding the distribution of their estate and the authority of the Executors to deal with the estate comes from the Will. However, the Executors may need a Grant issued by the High Court to confirm this.
Where a person has died intestate (without a Will or valid Will), the Administrator has no authority to act until a Grant of Letters of Administration is issued and must wait until a Grant is issued before they can act. Administrators are usually given the same status as an Executor.
The duty of a Personal Representative (regardless of whether they are an Executor or Administrator) is to collect in the estate of the deceased and pay the estate to whom it should be paid.
The Personal Representative should obtain information regarding the assets and liabilities of the estate as soon as possible. This is to check whether the estate will be insolvent. This occurs when the debts of the estate exceed the assets of the estate. The Personal Representative needs to be very careful when dealing with an insolvent estate, especially when making payments.
It is very easy to incur personal liability by making payment to the wrong person. Advice should be sought immediately if there is a possibility the estate could be insolvent to avoid any future difficulties.
If the deceased had assets abroad, this could make matters more complicated. Although the assets may be in another country, if the deceased was treated as domiciled in the UK, then the assets will be included in the value of the UK estate for Inheritance Tax purposes. The relevant probate process will need to be followed and tax might need to be paid in the country concerned. Advice should be sought at an early stage where foreign assets are involved.
Around one in four estates paying Inheritance Tax will be subject to investigation by HM Revenue & Customs.
Read more advice on Estate Administration through our articles linked to this important topic: