When someone dies it is easy to feel overwhelmed by the amount of things that need to be done.
Most people use a professional executor even when a Will has not appointed one. The following pages describe what a professional executor like ITC will do during the administration of the estate (probate).
These are different in Scotland, so please be sure to also visit our dedicated Scotland pages, if appropriate.
On this page:Tasks undertaken by a professional executor
Completing the probate forms
Paying Inheritance Tax
Advertisement for creditors
Paying the debts
Preparing the estate accounts
Distributing the estate to the beneficiaries
- Secure the deceased’s assets and property - if it is to be left unoccupied.
- Find and read the Will if there is one, to confirm its validity.
- Contact the personal representatives, or if there aren’t any, determine who is entitled to administer the estate.
- Find all documentation relating to the deceased’s life, both financial and otherwise.
- Register the death by sending a death certificate to each of the asset and liability holders and asking them for confirmation of the value of each asset/liability at the date of death together with the level of income received during the last tax year up to the date of death.
- Open a bank account on behalf of the estate.
- Fill in the appropriate probate forms and send them back to the controlling Probate Registry along with the original Will and the deceased’s death certificate.
- Complete IHT 205 if the estate is not subject to inheritance tax (the current threshold is £325,000, which rose from £312,000 on 6th April 2009).
- Complete IHT 400 if the estate is subject to inheritance tax or where certain circumstances apply, such as foreign assets valued over £100,000.
- Arrange funds or a loan to pay probate fees and inheritance tax.
- Receive the Grant of Probate.
- Place the statutory advertisement for creditors and other claimants.
- Send a copy of the Grant of Probate to all the asset holders and requesting payment of all funds.
- Complete the Income Tax and Capital Gains Tax forms for the period of administration.
- Paying all creditors and Inheritance Tax where due.
- Obtain the Inheritance Tax discharge certificate, if applicable
- Completing stock and share transfer forms and drafting an assent for the property, when appropriate.
- Prepare the estate accounts.
- Pay all beneficiaries and distribute the legacies - once the accounts have been approved by the personal representatives and/or residuary beneficiaries.
- Keep all correspondence.
Bank and building society accounts
Premium bonds and national savings certificates
Employment and wage related contracts
State pension and benefits
Private pensions, company pensions and life insurance policies
The deceased’s car
Items such as jewellery, paintings, furniture and collectibles
If the deceased held accounts in his/her sole name, the professional executor will write to all the bank and building societies where the accounts were held, explaining the position and enclosing a copy of the death certificate.
The professional executor will ask the bank to stop all standing orders and direct debits and to send them a letter of final account and details of any tax certificates that may have been issued for the accounts, along with a list of deeds and share certificates that they may be holding on behalf of the deceased.
Any cheques that the deceased wrote prior to death, and subsequently presented to the bank will be returned with a note stating ‘drawer deceased’.
Cheques that are presented to the bank and not met in this way become part of the deceased’s debts and will be entered into the probate forms.
Money can be paid into the frozen account, or the personal representative’s account, until the estate is distributed.
If the professional executor cannot find National Savings & Investment certificates (NS&I) but it is thought that the deceased may have owned bonds or certificates, they will contact the NS&I as they have a free tracing service.
If the deceased had Premium Bonds they can be left in the prize draw for one year after the date of death, or cashed in. Premium Bonds must be cashed in after this period as they cannot be transferred.
If the deceased was employed at the date of death, it is likely that wages will be outstanding.
The professional executor will write to the employer stating their position, enclosing a copy of the death certificate and asking for a final assessment of outstanding wages.
In common with most other creditors, an employer will usually wait to see probate before paying any outstanding money to the estate.
The Department for Work and Pensions (DWP) should be notified of the deceased’s death using the Certificate of registration of death (BD8) form that the Registrar will give to the person who registers the death. The professional executor will complete this form.
Pension and state benefits that have not been paid to the deceased up to the date of death will be claimed and entered into the probate forms as money owed to the estate. However if the deceased was receiving income support it may be that money has been paid in advance of the death and the Benefits Agency may be due a refund.
You should also notify the local tax office if the deceased was in receipt ot tax credits to prevent later claims for repayment.
If the deceased had an occupational, company or private pension, or a life insurance policy, the providers will be contacted with a copy of the death certificate and the request for a calculation of the final statement.
If the policy has been written in trust for someone else it can usually be paid out to that person straight away, otherwise it will form a part of the deceased’s estate and must be declared on the probate forms.
Funds of this kind are sometimes paid directly from the policy companies to a mortgage provider or creditor.
If the deceased owned stocks and shares, the professional executor will write to the registrar of the respective share company asking for confirmation that the certificates found are valid.
If it was thought that the deceased owned shares in a company but the certificates cannot be found, it is likely that they are held by a stockbroker or at the deceased’s bank or with the deceased’s accountant, in which case the professional executor will contact the relevant parties enclosing a copy of the death certificate and asking for confirmation that the shares exist.
Most quoted companies no longer issue share certificates unless they are specifically requested to do so. If the shares were purchased recently, they are likely to be held by an electronic settlement system such as CREST. This will be confirmed by the registrar.
A stockbroker will charge a fee to the estate for valuing the shares or their value can be checked by looking at the Stock Exchange Daily Official List or online websites such as http://www.ft.com/.
The share value needed is the value of the shares on the day the deceased died (or on the previous Friday if they died over the weekend) and it is this price that will be entered into the probate forms.
An estimate of the share value is sufficient for small estates, however for estates worth more than the Inheritance Tax threshold, a formal valuation will be required.
If the deceased paid rent it is likely that rent will have been paid for a period after their death.
If this is the case, a copy of the rent book will be made before a final statement is requested from the landlord. This sum should be entered into the probate form as money owed to the estate.
If the deceased was in arrears with the rent, the landlord will notify the professional executor and the outstanding debt must be entered into the forms as a debt of the estate.
If a garage is contacted for a valuation, the professional executor will ask for the estimated value of the vehicle on the date the deceased died. The value of the vehicle will then be written on the forms as an asset.
If there were outstanding debts against the car, if it was bought with a loan or with a hire purchase agreement for example, then those will be recorded as debts against the estate.
The professional executor can sell the deceased’s car before applying for probate.
It is reasonable to give a total value of many household items if no individual item has a value greater than £500.
If the deceased was married or in a civil partnership, it is likely that all household goods will be considered to have belonged to the deceased and to the spouse or civil partner jointly and the value of those goods should be halved and that figure entered into the forms.
Items that have been valued for insurance purposes will have been insured for a replacement value, and this value will be higher than the value to be recorded in the probate forms. For the purposes of probate the price that is entered is the one that would be received if the goods were sold on the open market on the date the deceased died.
If any items need to be valued by a professional, those fees will be payable from the estate.
- Sole ownership - If the deceased owned a property in their name only, it is referred to as sole ownership. In this case, the property will be left to the person the deceased wished to leave it to under the terms of their Will, or whoever is entitled to the property under the rules of intestacy.
- Joint ownership - When two or more people own a property together, it is either owned under an agreement where they are referred to as ‘joint tenants’ or ‘tenants in common’.
- Joint tenants - If two or more people own a property as ‘joint tenants’ it means that when one of them dies the deceased’s interest passes automatically to the surviving owner(s), regardless of the terms of the Will or rules of intestacy. It is not necessary to obtain a grant where property is held ‘jointly’ in this way.
- Tenants in common - If a property is held by two or more people as ‘tenants in common’ then the deceased’s share does not pass automatically to the surviving owners, but remains as part of the deceased’s estate to be distributed as they wished in their Will, or under the rules of intestacy. This arrangement is more usual in second marriages or civil partnerships and between friends and family members. It is always necessary to obtain a Grant of Probate when property is held in this way.
Household bills such as water, gas, electricity and telephone
Dealing with the mortgage
Credit card bills, overdraft and loan agreements
The funeral bill and expenses
Hire purchase agreements and personal loans
The Income Tax liability of the estate
The Capital Gains Tax (CGT) liability of the estate
The professional executor will write to all the service providers to request a final account.
If the deceased had direct debit accounts in place, these will be cancelled if they are in a sole name, or transferred to the spouse or civil partner’s new sole account.
If a property is to be sold, the service provider will be told that the account will be settled by the estate thereafter.
If the deceased paid Council Tax, the local authority will be informed as soon as possible, as Council Tax ceases to be due from the date of the deceased’s death.
If the deceased did not live alone, the council should still be informed, as it may be that the surviving occupant will be entitled to a 25% reduction if they are living alone or with dependant children.
Local councils do not charge Council Tax on unoccupied property until 6 months after probate is granted.
Refunds of Council Tax will be registered on the probate forms as an asset due to the estate as described above.
If there is no mortgage on a property and it is to be transferred to a beneficiary, the professional executor will transfer the ownership to the beneficiary.
The Assent must be completed, then witnessed and signed by both the beneficiary and the professional executor and returned to the Land Registry with evidence of identity, the fee and a copy of the Grant of Probate.
An open market valuation is required in all cases, even if the estate is not tax-paying. Satisfactory evidence of the property value must be supplied to HM Revenue & Customs and a professional executor will review each property on a case by case basis.
If there is a mortgage on the property and a Life Assurance, Endowment, or Mortgage Protection policy exists which would pay the remaining mortgage in the event of the deceased’s death, the professional executor will establish whether the policy can be used to redeem the mortgaga.
If a beneficiary is to inherit a property which is subject to a mortgage then either the mortgage must be repaid or the beneficiary must refinance the mortgage.
If the property is to be sold, the mortgage will be paid out of the sale proceeds.
If the deceased had property abroad, specialist advice will be sought as the rules regarding ownership, valuation and title deeds differs throughout the world.
If there is a mortgage on the deceased’s property, the professional executor will contact the mortgage lender to advise them of the death.
They will ask for the outstanding value of the mortgage. If the deceased had a life assurance or mortgage protection policy for their mortgage, the professional executor will check whether the policy proceeds can be used to settle the mortgage and whether there are sufficient funds.
Although most lenders understand that a mortgage will not be paid whilst the personal representatives wait for the Grant, lenders require that the resulting mortgage arrears are paid when the estate is in funds.
If the deceased had outstanding debts with credit card and loan companies, the professional executor will write to those companies asking for a final statement of the deceased’s account.
These debts will be entered into the probate forms, and settled out of the deceased’s estate when probate has been received and sufficient funds obtained.
Funeral bills and expenses should be paid directly from the deceased’s bank accounts.
Banks will normally release the funds to pay for the funeral when given the funeral director’s bill and a copy of the death certificate.
If there are insufficient funds in the account, a deposit or the disbursements (costs to third parties such as the crematorium or organist) are likely to be requested.
It is important to appreciate that whoever arranges the funeral is responsible for paying the bill.
The professional executor will contact the loan companies and request a final statement.
If the loan or agreement was in place to pay for an asset, such as a car or furniture, then that asset will be entered into the probate forms alongside the debt.
Hire purchase agreements cannot be continued and must be repaid once probate has been received and the estate is in funds to settle.
Notifying the Inland Revenue
One of the first things the professional executor will do is to write to the Inland Revenue notifying them of the deceased’s date of death, quoting the deceased’s tax reference and National Insurance number, and asking if the estate will owe or be owed any outstanding tax on behalf of the deceased.
The professional executor will need to complete Form R27 which contains questions about the deceased’s Income Tax situation.
Completion of this form will help the Inland Revenue to determine the deceased’s tax position.
Income Tax liability in the year up to the deceased’s death
Professional executors are entitled to claim the deceased’s personal allowance for the tax year in which they died, on behalf of the estate. This includes areas such as the deceased’s salary, pension, benefits, interest and dividends.
Income that continues to be paid to the deceased after the death will not be included, as this falls under income received during administration and will be taxed separately.
Income Tax liability after death
The estate may be issued with a tax return and assessed for income tax from the date of the deceased’s death to the end of the administration.
The professional executor is not entitled to claim the benefit of a personal allowance on behalf of the estate except for limited relief for one year on interest on any loan taken out to pay the inheritance tax.
Savings income, such as bank and building society interest, will be taxed at the savings rate.
Other income, such as rents from property, will be taxed at the basic rate. Tax at the dividend rate on foreign dividend income may also need to be paid because it is not taxed at source.
Estates over the inheritance tax threshold
If the value of the estate is over £325,000, the current Inheritance Tax threshold (which rose from £312,000 on 6th April 2009), form PA1 and either form IHT205 or form IHT421 (the Probate Summary) will need to be completed and sent together with the Will, if one exists, and the death certificate to the Probate Registry.
Form IHT400 may also need to be completed and sent to HMRC Inheritance Tax unless the estate is below the threshold or exempt from tax.
Please refer to the ‘Completing the probate forms’ section below for further details.
The Income Tax liability of beneficiaries
Beneficiaries must declare any income received on their tax returns, although they will not have to pay tax on their inheritance if the tax has already been paid by the estate.
The professional executor will issue each beneficiary with a form R185 certificate, which will show the gross and net income of the estate, and the tax that has already been deducted. This should be included by the beneficiary with their Tax Return.
If a beneficiary is a higher rate taxpayer, he/she may be liable for more tax but non-taxpayers can reclaim the tax.
Capital Gains/losses up to the date of death
The Capital Gains Tax liability of the deceased will be assessed up to the point of death.
If the deceased made a Capital Gain that they had not previously declared, it will need to be included and submitted on his/her tax return and any Capital Gains Tax will need to be paid.
The Personal Representatives of a deceased person can carry back unused allowable losses arising in the tax year in which the person died and deduct them from total chargeable gains of the three preceding tax years; the losses must be set off against gains in a later year before making set offs against gains of an earlier year.
It is not possible to offset unused losses for the period before death against gains made afterwards.
Capital Gains after death
The gains made by the estate itself will also be liable for tax during the period of administration from the date of death to the end of the distribution of the estate.
If the deceased’s assets are sold for more than their value at the date of the deceased’s death, with a resulting gain of more than the annual allowance (currently £10,600 in one tax year for 2011/12), there may be capital gains tax to pay, which is charged at the rate of 28%.
If it seems likely that there will be capital gains tax to pay, the professional executor will consult the beneficiaries, as it may be that the beneficiaries are non tax payers, or charities, in which case, tax can be saved or reclaimed at a later date.
Inheritance Tax (IHT)
Inheritance Tax is calculated on ‘bands’ of the value of the estate in much the same way that income tax is calculated on an individual’s earnings.
If the deceased’s estate is liable for Inheritance Tax these are general guidelines to be aware of:
- The nil rate band - the Inheritance Tax nil rate band is the amount of the estate on which there is no Inheritance Tax to pay. If the estate, including any assets held in trust and gifts made within seven years of death, is less than the nil rate band, no Inheritance Tax will be due on it. Inheritance Tax is not due on the first £325,000, the current nil rate band, of the value of the estate, as it is taxed at 0%.
- The taxable band - anything over and above the nil rate band is charged at 40% if the estate is taxable.
- Exemptions for married couples and civil partners - if the deceased was married or in a registered civil partnership at the time of death, anything passing to the surviving spouse or civil partner is exempt from Inheritance Tax.
Please also refer to the Paying Inheritance Tax section below
If the deceased had documents such as a passport, driving licence, library membership, bus pass, disabled badge or parking permit, the professional executor will return these to the appropriate offices to be cancelled, minimising the risk of identity fraud.
When all the information has been gathered the professional executor will complete the necessary forms and send them to the Probate Registry.
Form PA1: The Probate Application Form
In this form, the following information will be requested:
- The deceased’s date of birth and death, full name, address, and occupation.
- The Will and whether personal representatives were appointed.
- The numbers of all of the deceased’s relatives in categories such as children, brothers and sisters, uncles and aunts etc.
- The applicant(s) (person or people to whom probate will be granted).
- Details of the surviving spouse or civil partner.
- Details of assets held in another name.
- The deceased’s adoption if applicable.
- Whether the deceased was illegitimate or had any illegitimate children.
Form IHT205: The Return of Estate Information
This form is used for small estates with a gross value of either less than the Inheritance Tax threshold, or estates worth less than £1 million, where there is no Inheritance Tax to pay because of spouse, civil partner or charity exemption.
In this form, the following information will be requested:
- If the deceased made gifts totalling more than £3,000 per year in the seven years prior to the date of death.
- If the deceased gave up the right to benefit from assets held in trust within seven years of the date of death.
- If the deceased made a gift, but continued to benefit from all or part of the gift.
- If the deceased had benefited from assets held in trust.
- If the deceased owned or benefited from assets held abroad.
- If the deceased held any life assurance policies.
- If the deceased’s had any pension policies.
- The gross value of the deceased’s assets including cash and money held in bank accounts and savings accounts.
Details will also be required for:
- Personal goods
- Stocks and shares
- Insurance policies
- Money owed to the deceased
- Business interests
- Land and property owned by the deceased
- Gifts and lifetime transfers
- Assets held in trust for the deceased
Form IHT400 - The Inland Revenue Account for Inheritance Tax
This is the form to complete where an estate is liable for Inheritance Tax and is similar to the Form IHT205 (see above)
It is longer and more detailed and requires the professional executor to complete an inventory of everything the deceased owned, and owed, at the date of death.
It requires the calculation of the amount of Inheritance Tax payable on the estate and contains a form for Inheritance Tax relief and exemptions.
If the estate is liable for Inheritance Tax, forms PA1 and IHT421 must be sent to the Probate Registry, together with the Will and the death certificate.
Form IHT400 should be sent to the HM Revenue & Customs Inheritance Tax office. They will confirm the amount of tax to be paid, request payment and, when the tax has been paid, send the receipted IHT421 to the Probate Registry so that they can issue probate.
There are many supplementary forms to accompany Form IHT400, including:
- IHT401 Domicile outside the United Kingdom
- IHT402 Claim to transfer unused nil rate band
- IHT403 Gifts and other transfers of value
- IHT404 Jointly owned assets
- IHT405 Houses, land, buildings and interests in land
- IHT406 Bank and Building Society accounts and National Savings & Investments
- IHT407 Household and personal goods
- IHT408 Household and personal goods donated to charity
- IHT409 Pensions
- IHT410 Life assurance and annuities
- IHT411 Listed stocks and shares
- IHT412 Unlisted stocks and shares and control holdings
- IHT413 Business and partnership interests and assets
- IHT414 Agricultural relief
- IHT415 Interest in another estate
- IHT416 Debts due to the estate
- IHT417 Foreign assets
- IHT418 Assets held in trust
- IHT419 Debts owed by the deceased
- IHT420 National Heritage assets, conditional exemption and offers in lieu of tax
- IHT421 Probate summary
The professional executor must sign the declaration on the final page of the form.
Inheritance Tax is payable six months from the end of the month in which the deceased died and interest will be charged on unpaid tax after that date.
Inheritance Tax must be paid before probate (the Grant) is issued and therefore before it has been possible to draw in all the assets of the estate.
The Inland Revenue review of Inheritance Tax after probate
The Inland Revenue can review the liability of Inheritance Tax even after probate has been granted. If, for example, the Inland Revenue decides that an incorrect estimate has been given for the deceased’s property, it has the right to go back to the professional executor to ask for more money.
If the professional executor discovers further assets or realise that there are inaccuracies in any of their declarations after the grant has been given, they can incur penalties if they do not inform the Inland Revenue.
Appealing against Inheritance Tax after probate
A tax calculation can be questioned at any time. Property valuations are often referred to the District Valuer. The professional executor can also claim Inheritance Tax relief if they sell shares at a loss within one year of the date of death and property within four years.
As well as collecting the assets of the estate, probate also gives the professional executor the authority to sell the estate’s assets, to pay any debts and to distribute the remainder of the estate in accordance with the Will or the rules of intestacy.
The professional executor may place an advertisement in the London Gazette and a local paper.
In law, creditors have two months from the date of the advertisement in which to make a claim against the estate. However, according to the Inheritance Provision for Family and Dependants Act (1975), other claims can be made against the estate in the first six months after probate has been granted.
There is a set order of priority as to who can be paid first:
- Any taxes.
- Creditors - such as loans, mortgages, and outstanding debts.
- If there is a Will, and there is absolutely no doubt that any creditor or other claimant will not step forward to make a claim against the estate, the beneficiaries can then be paid.
The professional executor will pay all the debts and a full and final receipt of settlement will be requested to assist with the final estate accounts.
The financial information collated since the date of death will be put into an organised report and approved by co-executors and/or the residuary beneficiaries.
They will include a summary of the estate comprising the following sections:
- Assets at the date of death.
- Liabilities at the date of death.
- Income received during the period of administration.
- Changes in asset value, i.e. an increase in a property price.
- Administrative expenses incurred during the period of administration.
- Distribution of legacies and the residue to beneficiaries.
A copy of the accounts will be sent to each of the co-executors and/or residuary beneficiaries for their approval. They will each be asked to sign and return them to the professional executor.
When the gifts or legacies are distributed, the beneficiaries will be asked to sign a receipt.
For beneficiaries under the age of 18, a parent or guardian will be asked to sign for them.
Following the distribution, the documentation will be retained for at least 12 years.
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