Probate & Estate Administration
The perils and pitfalls of DIY probateAugust 29, 2018
Coping with the loss of someone close to you isn’t easy. If you’re also faced with sorting out their financial matters and dealing with their property and personal possessions, everything can seem so much harder. Andrew Williams, Wills and Tax Planning Solicitor, explains the probate process and discusses the perils and pitfalls of doing it yourself rather than using a legal professional.
Wills name one or more people as executors, who will be responsible for dealing with the estate and carrying out any wishes detailed in the Will.
Where relevant, the executor is responsible for applying for a ‘grant of probate’. Probate may be needed if the person who died leaves assets worth more than £5,000 solely in their name or has property or land in their own name or as ‘tenants in common’. A grant of probate is a legal document that allows the executor to handle the deceased person’s affairs. Probate can be a complicated, lengthy process.
If the deceased person died ‘intestate’ (that is, leaving no will, or if the will is invalid for any reason), or where there is a valid will but the executor is unable or unwilling to act, then an administrator will need to be appointed to obtain the ’grant of letters of administration’ and to administer the estate.
Inheritance Tax (IHT)
Depending on the value of the estate and to whom it is left, IHT may need to be paid. It’s not always straightforward, as there are certain exemptions for money and assets passing to a spouse, civil partner or charity. Subject to these and other exemptions, such as business and agricultural property relief, IHT is usually payable on the value of the estate over the tax-free threshold (known as the ‘Nil-Rate Band’), which is currently £325,000.
If the person who has died is a widow/ widower or a survivor from a civil partnership, any proportion of the Nil-Rate Band which was unused when their husband/wife/civil partner died may be available to use on the second death. Last year the government introduced a new Family Home Allowance known as the ‘Residence Nil-Rate Band’. This will allow more people to leave their main residence to their direct descendants free of IHT. To claim these allowances, paperwork will have to be completed during the Probate process.
‘Do it yourself’
Many personal representatives (that is, the executors or administrators) will often try to deal with the administration of the estate themselves, without seeking legal advice, in order to save on legal expenses.
A large number of personal applications for Probate are returned because they contain errors, which can delay the probate process. We have noticed that many people initially attempting DIY Probate will often seek our advice when they have made errors or find the paperwork too difficult.
DIY probates also increase the risk of IHT evasion (such as failure to disclose details of assets held by the deceased at death and/or gifts made by them in the seven years before their death) and the incorrect or even fraudulent distribution of assets. The idea that relatives can save on solicitors’ fees might be an attractive one, but probate and IHT can be incredibly complex areas for a lay person to navigate and the chances of making a costly mistake are high.
The rise in DIY probate could, in part, also explain why there are an increasing number of legal disputes over inheritance that reach the courts and perhaps why HM Revenue & Customs are now so concerned over IHT evasion. There has been an 85% leap in the number of high court cases launched by claimants dissatisfied with their inheritance. Such disputes can dissipate the assets of an estate very quickly, so DIY probate can be a false economy.
A lot of these issues can be resolved over time, but it is obviously better that they be avoided altogether at the outset. Personal representatives also carry a certain amount of personal liability in their role and they can face substantial legal claims. There are lots of ways to slip up, if corners are cut, or the personal representatives are unaware of the law and their obligations, especially when the deceased did not leave a Will and money may have been owed by the deceased.
In addition, following bereavement, not everyone can cope with the loss of a loved one and it may be too much of an emotional strain to carry out the probate work personally.