The Probate Process: what you need to know
Dealing with the bureaucracy following a death is challenging in a country you know, as it is something most people only have to do a few times in their lives. If you have to do it in another country, it can be baffling, as every country has its own cultural norms that just do not make sense to someone who has not grown up there. They may make little sense to those who have lived there all their lives too.
In England, the ‘probate’ process is designed to ensure that HM Revenue & Customs collects the inheritance tax due to it and to prevent assets from being claimed by those who are not entitled to them.
In general, unless assets are of a relatively modest value or are jointly owned, a grant of representation issued by the Probate Registry (part of the High Court) will be required before the assets can be dealt with. If there is a Will appointing executors, this will be a grant of probate. If there is no Will or executors are not appointed or able to act, this will be a grant of letters of administration.
Before the application for the grant can be made, it is necessary to determine whether or not inheritance tax is payable. The first £325,000 of an estate is taxed at 0%, and tax is charged at 40% above that unless an exemption or relief is available or one or more of the extra nil rate bands for residential property or as a surviving spouse can be claimed.
If inheritance tax is payable, an inheritance tax return must be filed and inheritance tax paid before the application for the grant can be made. Even if there is no inheritance tax payable, an inheritance tax return may still be required. Examples include high-value (£3 million or more) estates, estates where there are associated trust interests, and lower-value foreign estates where there is a possibility that the deceased was domiciled / deemed domiciled for tax purposes, which would bring the foreign assets into charge.
It is not often appreciated that not only executors are liable for inheritance tax and must complete inheritance tax returns. The legislation sets out a wide group of people who may be or become responsible for this, including those who ultimately benefit from the assets.
Funding the inheritance tax that must be paid before an application for the grant can be made can be challenging. Many UK banks and investment houses will now release funds directly to HMRC for this purpose, but this will not always be possible, and funds may have to be found elsewhere, which may mean using the executors’ or beneficiaries’ personal funds. If there is scope for pre-death planning, considering how the tax can be funded is advisable. This is particularly relevant for estates in multiple jurisdictions, where the process can take considerable time as it may be necessary to work through each jurisdiction in turn as the papers from one country unlock the process in the next.
Once the inheritance tax return has been filed and the necessary tax has been paid, the application for the grant can be made. In more routine cases, the application can be made online, a legal statement generated for the executors / administrators to sign, and any supporting papers, which would include the original Will, are posted to the Probate Registry. In more complicated cases, where there may be no Will or there is a foreign element, the application must still be made one paper and all supporting papers are posted to the Probate Registry. In our experience, it is not possible to courier papers to the Probate Registry, and delays with the postal service can cause significant problems.
The Probate Registry says that probate is usually issued within 16 weeks of the application being submitted, and paper applications will take longer. In our experience, it can be both much less and much more than 16 weeks. It is hard to predict, but it is vital to do everything possible to pre-empt any inquiries, which will only introduce delays into the system. This is particularly important in cases with a foreign element, where the documents may be unfamiliar to those working at the Probate Registry and it can be difficult to work out or even obtain what will be acceptable. A wide experience with different types of foreign documents is helpful, as is a good working relationship with foreign advisers.
Once the grant has been obtained, there is still much to be done to deal with the estate and, where necessary, agree on the inheritance tax position. Those dealing with anything other than relatively low value, straightforward estates need to be prepared for the long haul.