Making A Will

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What to do when someone dies without leaving a Will?

It is very difficult to cope with the financial and business side of things when you are grieving the loss of a relative or friend. However, seeing a Solicitor can help.

Wills

On the death of a loved one the first thing you must establish is whether he or she left a Will. If there is a Will, it should guide you as to who the deceased wanted to act in dealing with his affairs i.e. the Will should appoint an executor. However, if there is no Will and all reasonable endeavours have been made to try and find one e.g. by contacting the deceased's solicitor and bank, looking through personal papers, checking with relatives etc. then you will need to administer the estate in accordance with the Intestacy Rules, as the deceased died Intestate i.e. without leaving a Will

Administrators

As there is no executor when a person dies intestate, then one or more "administrators" must be appointed. They will usually be one or more of the beneficiaries of the estate.

It is the Administrators duty to administer the estate in accordance with the Intestacy Rules. They must act in the best interests of the beneficiaries. If there are assets held in the deceased's name which are over £5,000 in value then a Grant of Letters of Administration will be needed. Sometimes a Grant is not necessary e.g. if all the assets are joint and pass to a surviving spouse. However, if the deceased made any gifts of over £3,000 in value in any particular year, then the Inland Revenue may still require details

Grant of Representation

The Grant of Letters of Administration is the official authority that banks and financial institutions will need to pay out the deceased's assets to the Administrators for distribution by them to the beneficiaries under the Intestacy Rules.

The various categories of beneficiaries in order of priority are:

• Spouse (Complicated as if the estate is worth more than £200,000 the spouse may need to share the residuary estate with other beneficiaries)
• Issue - on statutory trusts
• Parents - equally if both alive
• Brothers and Sisters of the whole blood on statutory trusts
• Brothers and Sisters of the half blood on statutory trusts
• Grandparents - equally if more than one
• Uncles and Aunts of the whole blood on statutory trusts
• Uncles and Aunts of the half blood on statutory trusts
• Crown

Statutory Trusts

The purpose of the statutory trusts is to determine membership of the class of beneficiaries and the terms on which they inherit. They contain 3 main provisions:

• The class of beneficiary

  The estate is held on trust in equal shares for those relatives in that category who are living at the deceased's death and include unborn babies who had been conceived at the date of death

• The contingency

  The beneficiaries entitlement is contingent upon them attaining the age of 18 or earlier marriage

• The substitution

  If a beneficiary in a particular category has died in the Intestate's lifetime leaving children, then those children will take their parent's share contingent on them reaching the age of 18 or their earlier marriage. For example if the Intestate died and was survived by his sister X and his brother Z had died during his lifetime leaving 2 children, the estate would be divided so that X would inherit 50% of the estate and Z surviving 2 children would inherit 25% each

  It can be very difficult to establish who the true beneficiaries under an intestacy are and a Solicitor will be able to advise you further on this point, including how to trace a beneficiary if necessary.

Valuing Assets

In order to obtain the Grant all the assets in the estate as well as the liabilities will need to be valued as at date of death. If the estate is worth over £325,000 in value then it is likely that Accounts will need to be prepared for the Inland Revenue for Inheritance Tax purposes.

The assets will include freehold and leasehold property, contents, bank and building society account balances, PEP's, ISA's, stocks and shares, life policies, National Savings investments including Premium Bonds etc.

Liabilities

These will include the funeral account and associated expenses e.g. death certificates, funeral buffet etc as well as any debts like household bills, credit cards.

The liabilities will be paid from any funds owned by the deceased as at date of death. These will be settled before any payment to beneficiaries are made.

If you as an Administrator incur any expenses on behalf of the estate do keep careful receipts as funds can be repaid to you in due course.

Inheritance Tax

The amount which can pass without incurring Inheritance Tax for deaths after 5th April 2009 is £325,000. Although if assets are passing from one spouse to another there will be a spouse exemption and no Inheritance Tax will be incurred. However, this kind of situation (depending on the aggregate value of both spouses estates) could mean that a greater amount of Inheritance Tax will become due on the second death.

If Inheritance Tax is due to be paid then a proportion of it may need to be paid before you can apply for the Grant of Letters of Administration (depending on the nature of the assets)

Inheritance Tax Planning

A Solicitor may be able to advise on some possible steps that the family could take to mitigate Inheritance Tax. Sometimes with careful planning the Inheritance Tax can be eliminated completely depending on the value of the estate. Post-death Inheritance Tax planning may be possible by redirecting some of the deceased's assets - depending on the Intestacy provisions and the value of the estate

If there are assets like private company shares, a Solicitor may also be able to assist you further with some Inheritance Planning involving the same

Lifetime Gifts

The Inland Revenue will also require details of any gifts of over £3,000 in value made per annum by the deceased in the last 7 years before date of death

Realising Assets

Once the Grant has been issued then the assets can be realised. Some of the assets may be very straightforward to cash e.g. closing a bank or building society account. Others may be a little more complex e.g. arranging transfer of assets such as freehold or leasehold property or stocks and shares. Once assets have been transferred and cashed all estate liabilities must be paid from the proceeds before the estate can be distributed. This includes settling any Inheritance Tax liability

Obtaining a Grant can be very straightforward. It can also be quite difficult if the nature of the assets are complicated, if there are many beneficiaries, if there is a defective Will leading to a partial Intestacy or if Inheritance Tax planning may be required. A Solicitor can assist with these matters and highlight key issues for you. When seeking the advice of a Solicitor it would be useful to take to him or her a list of addresses for all parties you think may have an interest in the estate, copies of death certificates for any persons who would have been entitled to the estate under the Intestacy Rules if they had survived and details of all assets and liabilities in the estate - even if you are unsure if they are valid.

 

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