With the festive season well and truly over and January being a particularly long and dreary month, it seems somehow appropriate to discuss death and taxes, or in other words, probate.
Probate is the legal process for dealing with the estate of someone who has died. It’s the responsibility of the executors named in their will. In most cases, executors will be family or friends of the deceased (lay executors), but some people appoint professional executors such as a solicitor. Professional executors are paid from the proceeds of the estate. They normally carry out the entire probate process and receive a fee for this too.
Lay executors can opt for DIY probate, where they deal with the Probate Registry directly. It’s quite common, although professional help might be needed for complicated estates. DIY probate is far cheaper, but very time-consuming.
Over the last year, I’ve been navigating the complex world of probate which can be costly if you get it wrong or use the wrong professional. In the last three years, I’ve got probate three times (I should say applied for a grant of representation but that’s the kind of formal language designed to put off ordinary consumers). It’s been a tough period as I lost both parents and my father-in-law in that time. But my experience is that any reasonable person, with a bit of support, can sort probate themselves. It costs £215 fee payable to the Probate Office (though the Government wants to raise this significantly for larger estates, which was another incentive for me to get probate as quickly as possible).
One of the last things my father said to me before he died was ‘it’s easy to do probate’. On his deathbed, his GP asked him if his affairs were in order; she meant had he written a will and had he made his wishes known about resuscitation, pain relief and other medical-related matters. But he, a retired GP, took her question to mean have you got your financial affairs in order for your heirs. To that question, the answer was yes. He’d done all the right things to mitigate inheritance tax (IHT) and he’d written a simple will so he replied ‘yes, I’ve even told my son to apply for probate’.
Though his papers were a bit of a muddle, I was able to gather the information I needed to fill in the probate and IHT forms. This, despite the fact that he had switched bank account after 50 years with NatWest just four months before he died (that’s a story for another day). In 2017, I had to do it all again for my dear, late mother. In fact, I found the probate process quite therapeutic. I was able to separate what the forms were about – the death of my parents – from the emotional reality of that fact. It gave me something to do, and it was something my father wanted me to do.
And in doing so, I’ve probably saved a huge sum of money. It’s hard to know just how much as probate pricing is opaque, but I found that if the estate is relatively simple and you have the time and inclination, filling in forms like PA1, IHT205 or IHT400 is possible for the average person. The same applies to applying for Power of Attorney. The language is old fashioned, the forms unnecessarily complex, the process somewhat Victorian, but it is doable.
(assuming you are in England or Wales and getting probate is necessary).
It’s much easier for the heirs if the will is simple with all the assets left to a spouse and/or children, with no complex instructions and no complicated trusts. It’s also easier if you’re the executor. Make sure your loved ones do not appoint a bank or a solicitor as the main executor as this will just cost you (they tend to charge a percentage of the estate rather than a flat fee). Of course, it is also easier if your loved one is organised and has kept records.
Do a bit of research. I got hold of a copy of the Which? guide to wills and probate which became required reading (I’m in a book club so it might be my next choice). There’s also a lot of information on the internet, but the UK Care Guide is a good place to start. It will guide you and provide background to the main exemptions and mistakes to avoid.
Contact the Probate Office to get hold of the forms you will need. If the estate is small and simple, then you only need forms PA1 and IHT205. If the estate is larger, for example, if inheritance tax is payable, or more complex for other reasons, you will need form IHT400. I got two sets of all forms so I could do a draft version before completing the final version. IHT was payable so I had to use form IHT400.
I then spent some weeks making sure I had all the information I needed. This included gathering all the information about any savings and investments as well as any gifts made in the last seven years from both capital and income. A house valuation was necessary (a local estate agent will most likely do that free of charge) as well as an estimate of the value of household items, including jewellery and silver, for which I paid for formal valuations.
Once I’d filled in my final version of the forms, I submitted them to the Probate Office and HMRC. There was one final step: to swear an oath that the information you’ve given is true to the best of your knowledge. As I live in London, I made a quick visit to the London Probate Office. That was free of charge whereas a solicitor will charge a small fee.
As IHT was payable, my deadline was six months after the death (to avoid interest on the tax owed). I submitted the forms with one month to spare. Once I’d got the grant of representation, I was immediately able to distribute the estate as the will set out. Six months on, I’ve heard nothing from HMRC so I’m still waiting for final confirmation that it has accepted my calculations as set out in my IHT400.
Death can’t be avoided, but taxes (and probate fees) can be mitigated.
Next time something more cheery — like how I invested my inheritance.