Administering an estate – Why it might take longer than you think

After someone has died there is a legal process that needs to be undertaken to ensure all their assets pass to the appropriate parties. How much work is required is dependent on a number of common factors such as the size of the estate (and if any taxes are), the type of assets in that estate, who the beneficiaries are and sometimes some less common factors such as, what monies (or other assets) the deceased has given away in the 7 years before they died, whether they had sold or given away an asset that they retained a benefit of and whether they had an interest in a trust or another person’s non-administered estate.

The early stage is always the same process and is often one of the most time consuming aspects. The Executors (or their legal representatives) of an estate need to establish the full extent of the assets and liabilities in an estate and specifically (for the purpose of making an Inheritance Tax declaration, which is necessary irrespective of tax being due) the date of death valuations of those assets and liabilities – this is a very specific snapshot in time and the balances on accounts, or to a lesser extent the value of a property, could differ the day before death or the day after death.

Some of these figures are easier to obtain than others and often any delays are entirely outside the Executors or their legal representative’s control as they are waiting on third parties to provide the information needed.

Once the extent of the assets is known an assessment can be carried out to determine which of the two Inheritance Tax forms are appropriate. For small (and simple) estates the form IHT205 is completed – the form starts with a series of questions that determine if it is the correct form to be completed, as soon as you fail these questions or if tax is due (or would be due except for the fact you can claim the Residence Nil Rate Band) you have to complete the much larger, far more complicated IHT400, which amongst other things requires more detail on everything being declared.

If an IHT400 is required, the process that occurs next is completely different. With an IHT205 it is sent straight to the Probate Registry with the other documents and a Grant of Probate is issued. With the IHT400, it must first be sent to HMRC with a receipt (IHT421) that they stamp and return so that an application for Probate can be made to the Probate Registry. HMRC can be incredibly slow at processing these documents (even if there is no tax to pay) and there is nothing that can be done to speed the process up – at their worst it can take up to 6 months to receive the receipt and even this is not the final confirmation they are happy with the information declared. This comes later, so distributing estates can be further held up waiting on clearance from HMRC that no (further) tax is due.

Even at this stage you can see that it could easily be up to 12 months from a death to obtain the Grant of Probate (depending on how long it takes to get the figures together to start with) – a stage that just gives you the legal power to deal with assets – after this the executors (or their legal representatives) have to place properties on the market, undertake the (often excessive) work required to cash in investments and shareholdings, close bank accounts, pay all remaining debts and all before they can even consider distributing assets.

The time it can take to complete an estate is never a reflection on the size of the estate, it is dictated by the amount of work required in that specific estate – even a small estate can quite easily have complicated factors that mean it can take longer than a significantly larger estate to administer from start to finish and further with the value of property at todays prices it doesn’t take much in the way of other assets to find yourself requiring that the IHT400 needs to be completed.

Written by Glenn Blair – Bates Wells & Braithwaite – 01787 880440

Glenn Blair

Glenn joined Bates Wells & Braithwaite in 2009 and gained experience across the firm before qualifying as a solicitor in November 2015. He has a law degree from the University of East Anglia and took the Legal Practice Course at the College of Law, London.

Glenn is part of the firm’s Wills, Trusts and Probate department and specialises in wills, powers of attorney and the administration of estates.

Away from work, Glenn takes a keen interest in watching and playing various sports and is a long-term season ticket holder at his local football club, Colchester United. A lot of his spare time is also spent enjoying his young family.