Administering an Estate

Administering an Estate

No one wants to think about death. Not their own death, nor especially that of a beloved family member or friend. We help our clients to prepare themselves both practically and mentally, and in some cases emotionally, for that inevitable moment. It can be a huge relief for some to know that their affairs are in order. For others, it is very trying and difficult making all the necessary decisions.

When a loved one sadly passes, there is a huge amount of work to be done. This, despite the fact that you are often barely functioning because of their loss. One of our team recently lost her mother and she is keen to share her practical thoughts and experiences with our readers. She found there is little straight-forward guidance available generally and of course most of us are administering an estate for the first time.

Make an Appointment with the local Registry Office

The initial hurdle to overcome is making an appointment to register the death at the deceased’s local Registry Office. (I am sorry – I’m going to refer to the person who has died as the ‘deceased’ for the purpose of clarity but I do recognise that no term is ideal.) You will need a ‘Medical Certificate of Cause of Death’ from the doctor in order to be able to do this. You will also be asked for various pieces of information and copies of documents but you will be advised exactly what is required.

‘Tell Us Once’ service

Do use their ‘Tell Us Once’ service as this undoubtedly saves you time and, more importantly, heartache. On your behalf, the Registry will contact HMRC (tax office), Passport Office, DWP (benefits), DVLA (driving licence) and the local council (possibly care fees). Again, various documents will be requested from you; do try to find them all. It may be that your loved one was due a tax rebate.

Arrange the Funeral and/or Memorial Service

The only other urgent task is to arrange the funeral. You may already know the deceased’s wishes or they may be detailed in their Will. (I hope they wrote one.) The deceased may hold a pre-paid funeral plan which may also detail their wishes but will certainly cover the basic costs. Opt for the earliest date you can for the funeral; you will not be able to move on until it has taken place. You may wish to think about placing an announcement in a local and/or national newspaper regarding the death and the date of the funeral. Once all this is done, you might want to take a breather as there is still much to be done, even if the estate is relatively simple. 

Gathering Finances

Once you can face it, you need to establish where the deceased held their ‘sole’ funds. (Joint funds will automatically pass to the other named account holder(s) according to the Laws of Survivorship.) This could include banks, building societies, Premium Bonds, financial advisors (ISAs/Bonds) etc. Register the death with each organisation and request a final valuation statement to be sent to you. (Do ask for a number of copies of the death certificate when you register the death. Whilst all organisations will return original copies to you, these certificates are like gold dust.) Do the same with all pension companies, including the DWP, if you didn’t use the ‘Tell Us Once’ service.

Your heart will be broken many times over the next few weeks as these organisations blandly respond to ‘The Late ________’ or the ‘Pers Reps (personal representatives) of _________’. It is shockingly impersonal. Do however retain all the documents received for your records. 

Probate?

You may need to go through Probate, you may not. Probate is the Latin word meaning ‘to prove’ so probate is the process of ‘proving’ the deceased’s death, who their personal representatives are, whether or not there is a Will, the assets etc. Each financial institution has its own rules and investment levels at which Probate needs to be done. Check with every financial institution where the deceased held ‘sole’ funds. Unfortunately, even if only one institution requires Probate, you will have to go through the process. Probate will also be required if the deceased held their property as Tenants in Common with a spouse or partner or individually. (You can check this via the Land Registry.)

Do go to the government website (https://www.gov.uk) and search under ‘Probate’. This site contains lots of really useful information, probably too much! From here, you can download all the necessary forms:

  • PA1 – complete by hand to apply for probate
  • PA2 – explains ‘How to obtain probate without using a solicitor’
  • PA3 – details probate fees (£215 at the time of writing)
  • PA4 – gives addresses of local Probate offices.

Tax forms for Inheritance Tax

You will also need to complete a tax form for inheritance tax purposes, even if there is nothing to pay. Complete form IHT205 if no tax is owing; complete IHT400 if inheritance tax is owing. If you struggle with either form, call one of the contact numbers or seek professional advice.

‘Swear an Oath’ at the Probate Office

Having sent off the necessary documents, you will need to arrange an appointment to ‘Swear an Oath’. Only one of the Executors needs to do this if you prefer.

Trusts

If there are any Trusts in the Will then these must be implemented within two years of the death. They cannot simply be ignored and need to be set up even if they are immediately closed again. A solicitor will be able to help you with this aspect of the estate administration but a fee will be payable for this service.

Distribute the Estate

Once you have all the final fund valuations, draw up an income and expenditure statement of the estate i.e. all the in and out payments. This should include any debts owed by the deceased. All debts must be settled prior to making any payments to beneficiaries. Circulate the income and expenditure statement as appropriate and distribute the estate.

Contact the Office of the Public Guardian

Lastly, (as if you haven’t already tackled enough bureaucracy), you should cancel any Enduring or Lasting Powers of Attorney held by the deceased. These are ‘lifetime’ documents and they cease to be of use once the Donor (the person who drew them up) has died. Send the original documents (there may be one for Finance and a separate one for Health) along with a copy of the death certificate and a covering letter to the Office of the Public Guardian to get them cancelled. They should not merely be destroyed.

Administering an estate is not pleasant but there is a certain satisfaction, and of course, relief, in seeing your loved one’s final wishes carried out as they wanted them to be. Alternatively, if it is a complicated Estate or you are lacking time, you could consult with an Estate Administration service.

Single sex couples

Single sex couples

In our 20 years of helping clients, we have written many Wills for single sex couples. I have been asked to write blogs and other articles regarding planning for single sex couples many times and each time I have struggled.  So, I decided that as part of the article I would explain why I stumble each time.

The reason is there is no difference and hence no article to write. The fundamental advice remains the same whether you are a single sex couple or a heterosexual couple.  You need a Will.

Whether you are single sex or heterosexual, if you are a couple and you want to provide for each other at first death, if you are not married or civil partnered, there is no protection for your partner.  The Inheritance (Provision for Family and Dependants) Act ’75 (see our other blog) does not make any provision for or any recognition of a partner.  Yes, if you are a dependant, which a partner could be construed as, you have a claim but a much inferior claim to those of a spouse or civil partner.  Your partner may end up with nothing.

My advice to that couple, whether heterosexual or single sex, will be that they each need to have an appropriately drafted Will.

In the very early days of Family Wills, prior to the introduction of Civil Partnership, the tax planning we could offer using a Will was quite limited.  However, since 2005 (for Civil Partnership), the advice for single sex couples regarding Inheritance Tax remains exactly the same as for a heterosexual couple – get a well-crafted Will each that has the appropriate planning within it and/or get married or civil partnered.  Not everyone wants to hear that advice, but when I can quantify how much Inheritance tax they will save, they often consider the option very carefully.

So, every aspect written in our website that mentions couples is not exclusive to heterosexual or single sex couples because it really doesn’t matter – it is relevant to both.

The pandemic from our perspective!

The pandemic from our perspective!

As we approach 15 months of living through the Covid pandemic, I thought it timely to give you our experiences to date.

I think it is one of the positives, which I will always be proud of, during this time that we have survived and come out stronger.  None of the team were furloughed and no one lost their job.  More importantly, the team rallied stronger than ever.

Within a very short time, just before the first lockdown, we took the decision to work from home.  We all climbed the steep learning curve of remote working and changed our working practices rapidly.  This was no small feat as, unbeknown to most of our clients, producing a legal document from start to finish requires managing a myriad of processes full of minutiae.

I think the biggest surprise to me was how quickly myself and my team and my clients switched to using online video conferencing.  I had always been very averse to that medium as I believed that the personal relationship that I so enjoyed with my clients could never be fostered.  I was proved wrong.  We have, like many professional businesses that used to work face to face with their clients, now learned that we can almost exclusively work online with our clients.  This is both time- and cost-effective, both to the business and the environment.  I cannot see us or many businesses returning to the old ways.

The team went back into the safe and socially-distanced office almost a year ago.  That is what they requested.  The novelty of working from home wore off but again, we have learned that when they need to work from home, they can do it very effectively.  Everyone’s a winner, and everyone is safe.  However, we still cannot conduct client meetings at the office.

We have sadly taken the inevitable ‘phone calls from our clients who have been affected by Covid, either themselves or their family and friends. Some have been seriously poorly and some have died.  It is always hugely shocking and upsetting.  The reality of the constant news bulletins then ‘hit home’.

We have a very positive outlook for the next six months.  Yes, full opening up has just been put back by four weeks until July 19th, but the future looks good.  We have plenty to be excited about with the launch of the new brand Hamilton Legacy and all that it will bring.  Family Wills has been trading for almost 20 years and we look forward to the next 20 years as Hamilton Legacy.

Would you give to charity in your Will?

Would you give to charity in your Will?

There are more than 185,000 registered charities in the UK and the number is growing by 5,000 per year.  Those charities vary from medical research, hospitals, children’s welfare, animal welfare, military veterans, air ambulance, universities, disaster assistance, local community funding and many, many more; the list is almost endless.  They are all in need and legacy-giving is an area of fundraising on which the charity sector is hugely reliant.

Whilst 35 percent of people say they would leave a legacy to charity in their Will, only seven per cent actually do so. 

37% of people have made a Will and, of those, 24% have mentioned a charity in it. Of those who have made a Will, it’s the younger age groups who are more likely to have left a gift to charity in their Will; 50% of 16- to 24-year olds compared to 21% of 65+ year olds. This statistic is also mirrored amongst those who have not yet made a Will. Of this group, 50% of 16- to 24-year olds said they would consider leaving a gift to charity, compared to just 17% of those aged 65+. 61% of this age group said they would not leave a legacy to charity in their Will.

The charities who receive the most in legacies on an annual basis are (1) Cancer Research UK (2) Royal National Lifeboat Institution (RNLI) and (3) Royal Society for the Prevention of Cruelty to Animals (RSPCA).

It has often been reported that charities have made themselves unpopular by their persistent and often unwelcome badgering of their donors during their lifetime which then deters those donors from leaving legacies in their Wills.  It has also been widely reported that the charities’ solicitors have been known to hound the executors and trustees of Wills rapaciously to extract as much as possible as quickly as possible for the charity coffers.  This can be very intimidating for the average lay executor.

That being said, many of my clients still wish to give to charities that are dear to them and my advice, when appropriate for an individual client, would be to use a Charitable Trust within their Wills. A Charitable Trust escapes the prying eyes of the charity solicitors who scour the probate registries checking to see who has left a legacy to them and then harassing the executors for that legacy.  A Charitable Trust is a simple mechanism where the total amount the testator wishes to donate to charity is detailed in the Will but the Will just states that it is in a Charitable Trust, not mentioning which charities are to benefit.  The monies are put into a trustee bank account in accordance with the Will trust.  The executors then distribute to the charities concerned when they are ready, unfettered by the charity solicitors.

But, how do the executors know which charities to gift to?  Well, accompanying the Will is a Letter of Wishes explaining the testator’s wishes.  This Letter of Wishes can be changed any time the testator desires before death.  Simple but effective.

An alternative to using a Charitable Trust is to use the Charities Aid Foundation (CAF) (https://www.cafonline.org/).  It is a charity that will manage your donation to gift to whichever charities you wish and you are able to dictate how that happens.  For a small fee to CAF, this will take that burden away from your trustees.

Another under-used benefit of charitable giving is for Inheritance Tax Planning.  For some wealthy clients who in turn have wealthy families, giving their wealth to their family is both unnecessary and not tax efficient.  In these cases, they will leave a gift up to their available nil rate band to their family and friends, tax-free, and the balance of their estate is gifted to charity.  Hence the whole estate passes tax-free at their death.  Please note that calculating their available nil rate band can be a complex computation involving unused nil rate bands and potentially the available residence nil rate band.  This can be accomplished using the appropriate wording within the Will but please ensure you use expert advice for this.

A further method of utilising charitable giving to reduce your inheritance tax bill is to gift 10% or more of your estate to charity in your Will.  If you satisfy this requirement you will get a tax relief, reducing the inheritance tax you pay on your estate at your death from 40% to 36%.  Therefore, sometimes, by gifting to charity, your family will receive more!!

Soft Succession Planning

Soft Succession Planning

Too often when I am sat with clients, we focus on the ‘hard facts’ in estate planning – how much their estate is worth, who owns what and of course tax- and cost-efficient ways of passing wealth to the future generations.  These are all vital parts of the process but it doesn’t end there.  We need to dig deeper into what I call the ‘soft facts’ to make sure we end up with what the client really wants to achieve.

Families are complex beasts with complex issues.  How is it going to impact a beneficiary when they receive what could be a large sum of money?  The industrialist and philanthropist, Andrew Carnegie, said “Why should men leave great fortunes to their children?  If it is from affection, then it is misguided affection because great sums bequeathed often work more for the injury than the good of the recipients.”  Admittedly that was said at the beginning of the 20th century and most of us haven’t got huge fortunes to leave.  But the sentiment is there.

A more recent example is that together Warren Buffett and Bill Gates have established the Buffett-Gates Giving Pledge which has resulted in many billionaires pledging most of their wealth to charity. In wanting the best for our children, maybe because we did not have that privilege ourselves, could we affect our children’s self-reliance, ambition and ultimately their self-esteem or hunger to work?  The values we pass on to our children, and the education and life experiences we encourage them to have, including learning how to become financially savvy and astute, are all part of life’s challenge.

What if beneficiaries have dependencies that could be catastrophic for them if they inherited large, or even small, sums of money?  I’m talking about alcohol, drugs or gambling addictions or indeed other socially-debilitating issues.

What if the client doesn’t really like or trust their daughter-in-law?  What if their son-in-law has money problems or his business is a little shaky?

Detailed meetings to really delve into the details are the only way to get to the bottom of it all.  Sometimes those can be ‘family’ meetings.  It is important to establish the values of that family and sometimes it is important to involve the next generation to ensure everyone is aware of the family expectations as well as preparing our children and other family members to handle and manage their inheritance.  This can be particularly pertinent with regard to family businesses and farms.

As you can imagine, the ‘softer issues’ are often harder to resolve than their ‘harder’ counterparts.  Proper estate planning, where the estate planner is prepared, experienced and qualified in teasing out that information from their clients, is key.  Make sure you feel comfortable with the estate planner you have chosen as, if they are doing their job correctly, you should be sharing information with them that is relevant but probably quite personal.