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Probate, Inheritance and Winding up Estates

Contents

Introduction
What is an Estate?
What is a Personal Representative?
What is a Grant of Representation?
What needs to be done?
Who makes the decisions?
How long will it take?
What sort of legal issues are involved?
What are the different types of legacies?
Do I need to contact the DWP (DHSSPS in Northern Ireland)?
Do taxes come out of the Residue?
What taxes are involved?
How is the estate to be distributed if there is no will?
What sort of complications can arise?

Introduction

The Estate of somebody who has died has to be dealt with by somebody. A lot of everyday tasks require attention and important decisions may have to be made with regard to the deceased’s property and personal belongings (for instance, should the house be sold?). At our practice, we will happily guide you through the issues involved and take all necessary steps to ensure that your duties as a personal representative are complied with and that the estate is distributed in accordance with the will or (if no will) in accordance with the laws of intestacy. We also hope that the information on this page will help to explain in broad terms what is involved and why it may be important to seek timely professional advice and assistance.

What is an Estate?

When a person dies, everything they own is referred to as the deceased’s “estate”. After payment of debts and taxes, the “estate” is divided among the beneficiaries in accordance with the deceased’s Will or if there is no Will, among the closest relatives in accordance with rules set out in the law of Intestacy. Click here for the intestacy rules in England and Wales. Click here for the intestacy rules in Northern Ireland.

What is a Personal Representative

A personal representative can be either an “executor” or “administrator”. Executors are the persons named in the Will to deal with the estate. Where there is no Will (in legal terms, where the deceased dies “intestate”), one or more of the closest living relatives is entitled to deal with the estate; the person is called an administrator.

The functions of the personal representative involve:

· Protecting the assets of the estate, e.g. making sure that everything is properly insured

· Taking reasonable steps to secure property and valuables

· Arranging lists of property and valuables and arranging for valuations of the property, shares etc.

· Finding out what debts have to be paid.

· Obtaining all other information necessary to obtain the legal documents which will allow the executor or administrator to deal with the estate.

What is a Grant of Representation

A “grant of representation” is the legal document which issues from the High Court Probate Office which allows the personal representative(s) to collect all assets of the deceased and administer the estate. Where there is a Will, the legal document is known as a Grant of Probate. Where there is no Will, it is known as a Grant of Administration. Until this document issues from the Probate Office, the personal representatives cannot generally do anything with the assets owned by the deceased person. In limited circumstances, it may be possible to administer an estate without obtaining a grant.

What needs to be done

It is necessary to go through the deceased’s papers (Bank/Building Society books/statements/insurance policies/saving certificates/shares/stocks/title deeds and any other papers which will help to identify the assets and liabilities of the estate)

The insurance cover on property or other valuable assets should be checked.

Practical steps may involve removing valuables, turning off the mains water, installing additional locks/window locks/alarm, letting neighbours, the insurance company and local Garda know if the house is unoccupied.

·Valuations must be obtained setting out the value of all the assets and liabilities of the estate at the date of death.

Tax liabilities must be dealt with.

Who makes the decisions?

The personal representative(s) should make decisions in consultation with the beneficiaries. For instance, before making a decision to sell any part of the estate, the personal representatives should discuss the matter with the beneficiaries concerned and should abide by the wishes of beneficiaries insofar as is practical.

How long will it take?

Although the law allows one year from the date of death for a personal representative to give beneficiaries what is due to them, the time it actually takes very much depends on the circumstances of each individual case. It will usually be upwards of 4 months before a grant of representation issues but it can take considerably longer. The following matters are relevant:

1. The size of the estate and the time it takes to get all of the detailed information required to complete an Inland Revenue Affidavit. This is a list of assets and liabilities and includes a questionnaire about what each beneficiary will receive or has received in the past. This must be given to Revenue and must be certified by them before an application can be made for a grant of probate or administration.

2. Whether the beneficiaries have received previous gifts/inheritances from any source. If so, full details will be required (this is necessary for tax purposes).

3. Whether there is likely to be a dispute. Personal representatives are protected from personal liability under the Inheritance (Provision for Family and Dependants) Act (or (NI) Order) if they have made a distribution of the net estate after six months from the date of the grant of probate.

What sort of legal issues are involved?

The starting point is usually the reading of the Will and identifying anything in it requiring legal interpetation or any circumstances which have changed since the Will was written. Sometimes there may be additions to the Will (in legal terms called “codicils”) and the effect of these should be carefully considered. There are an infinite range of circumstances which may mean that legal advice is needed, such as:-

Where there is any doubt about the meaning of the Will or its validity.
Title matters i.e. ownership of property.
Whether the deceased was divorced or separated.
From which account debts should be paid and whether there is sufficient cash to pay liabilities and legacies
If a beneficiary is under the age of 18 years or is suffering from a disability.
If a farm or business is involved.
The availability of various tax reliefs and steps which could be taken after the death to make sure that all possible tax relief can be claimed.
Whether any insurance policies/credit union accounts/post office accounts have been nominated as payable to a particular individual.
Claims/disputes by disappointed beneficiaries.
Lifetime gifts that should be taken into account.
Legacies of items which were sold by the deceased before death.
Trusts or implied trusts.
Pension rights
Foreign assets
Whether the deceased was domiciled abroad.
Partial intestacy (where there is a Will but it does not cover all the property of the deceased)
If the deceased owned assets jointly with any other person.
Tax Planning.

What are the different types of legacies?

A specific legacy is an item specifically referred to in the Will such as jewellery, a car or a particular property. A pecuniary legacy is a bequest of cash. A residuary legacy is what is left over after all debts, funeral and administration expenses and other legacies have been paid.

Do I need to contact the Department for Work and Pensions (Department of Health Social Services and Public Safety in Northern Ireland)

If the deceased was on a state pension or received non-contributory benefits it may be necessary to contact the Department to find out whether the Department intends to claim back money which was paid to the deceased to which he was not entitled (the personal representative may otherwise be held personally liable). A refund may be due to the Department.

Do taxes come out of the Residue?

Not always. Except where there are not enough assets in the estate to pay all taxes, liabilities and cash legacies, in general, taxes due by the deceased come out of the residue. Although beneficiaries must pay their own inheritance tax, the personal representatives can be held liable for a beneficiary’s tax in the event of non-compliance.

What taxes are involved?

Apart from any taxes due by the deceased before his death, clearance should be obtained in respect of the following taxes:

Income tax and capital gains tax which may have arisen during the administration of the estate (the personal representative is otherwise personally liable).

Inheritance tax is payable at the rate of 40% on amount of the estate which exceeds the nil rate band subject to exempt gifts and reliefs. There are complicated rules where there have been previous gifts/inheritances received by a beneficiary either from the deceased or any other source.

How is the estate to be distributed if there is no Will.

If there is no will, the estates should be distributed in accordance with the Intestacy Rules. The Intestacy Rules of Northern Ireland differ slightly from the Intestacy Rules of England and Wales.

What sort of complications can arise?

Certain rules of law may override the terms of the Will. This could involve a challenge to the validity of the will itself or claim against the estate under the Inheritance (Provision for Family and Dependants) (NI) 1979.

There are various laws which impose obligations on the personal representatives. Please click the link Claims against Estates for more information on this topic