Is probate required?

[hiriskpaul]

A friends mother died recently and I have been asked to help sort out probate, etc. I have not seen the will, but I understand it is straightforward. Everything left equally between surviving children. There is no property involved, or any investments other than cash ISAs. In addition, her estate is well below the IHT limit. In these circumstances, am I right in saying that probate is not required?

There are 5 beneficiaries and 2 of them had POA. One wants to use a solicitor, the others would prefer not to. It is a while since I did anything like this, but surely a solicitor is not needed here?

Pointers as to how to settle this with least hassle would be appreciated.

[AJC5001]

There are 5 beneficiaries and 2 of them had POA. One wants to use a solicitor, the others would prefer not to. It is a while since I did anything like this, but surely a solicitor is not needed here?

Pointers as to how to settle this with least hassle would be appreciated.

Who are the executors? They should be who decides on how to execute the Will.

Adrian

[hiriskpaul]

Have not seen the will yet, but I understand that some of the beneficiaries are executors. Whether all beneficiaries are executors or there are executors who are not beneficiaries, I don't know yet.

Assuming the executors are OK with it though, is probate likely to be required in this instance? Assuming of course her bank does not insist on probate.

[rgifford]

Assuming the executors are OK with it though, is probate likely to be required in this instance? Assuming of course her bank does not insist on probate.

That is the key question. When my dad died the banks holding his money were happy to release that up to a certain level without probate, which my dad was under. About £25000 as I recall but each bank will have different rules/levels and some of the money being in an ISA may make them different again.

Any money held in a joint account passes to the other account holders outside the will if this is relevant.

[Clitheroekid]

In these circumstances, am I right in saying that probate is not required?

As has been said, it's the executors who decide whether or not to obtain probate. The default position is that probate would be obtained, so it would have to be a unanimous decision not to do so. If only one of them wishes to obtain probate he or she is fully entitled to do so against opposition from the co-executors.

Assuming they all agree not to obtain probate the next question is whether any of the banks and so on where the assets are held will insist on it. Most will allow assets to be released without probate if they are below a certain cash value (which varies from one institution to another) and in return for an indemnity signed by all the executors. This is basically a letter saying that if someone comes along with better title (e.g. if the mother made a later Will leaving everything to the cats' home) they will repay the money.

If it is proposed to go ahead without probate it's important to ensure that all the banks and so on are willing to play ball. It would be very annoying to go through all the rigmarole with them (and there is definitely more rigmarole involved where there's no probate) only to find out that the last one on the list insists on probate.

It is a while since I did anything like this, but surely a solicitor is not needed here?

At the risk of doing my chums out of a job this does sound like something that could be dealt with through a personal application.

It's a matter of cost as against convenience. If, as I assume, it's only a small estate the legal fees for simply obtaining the grant wouldn't be very high, particularly if the solicitor is supplied with all the information required, rather than them having to obtain it themselves. And as the bill is effectively split 5 ways the amount paid by each individual may well be small enough to convince them that it's worth doing. The executors can always ring around local firms and get a few quotes.

[TheDove]

OTOH there is certainly no reason not to do this yourself. In my experience the most onerous part of the exercise has always been the gathering of the information, which you are going to have to do yourself (or with the help of family members) anyway. Thereafter there are some HMRC forms to complete - which might be minimal in your case given the nature of the estate - and an oath to swear. It's not difficult, if you have the time. The HMRC website is extremely helpful and even the telephone helpline for probate applications gets answered within seconds rather than hours !

Dove

[oldtimer]

probate is quite easy to do yourself, but I'm a bit confused as to why you are expected to do this work if others are the executors?

[melonfool]

probate is quite easy to do yourself, but I'm a bit confused as to why you are expected to do this work if others are the executors?

He didn't say he was expected to, he said he had been asked to help out.

Mel

[modellingman]

I have been a lay executor/administrator on 3 occasions. One died intestate. One did not require probate, two did. Of the wills requiring probate, one was because a property was involved, the other because the size of the estate meant that financial institutions would not release assets until probate had been obtained.

My advice to any executor where the will is quite straightforward and clear and where there is unlikely to be any contention amongst beneficiaries would be the DIY approach. Sure it is a bit time consuming, but the hardest part in my experience was identifying all the assets and liabilities of the deceased, ruling out old accounts that had long since been closed, etc. Unless planning on emptying all the deceased's papers into black bin bags and handing it over to a solicitor to sort out, this is something the executors are going to have to do anyway. As an aside, here we can all make life a little easier for our own executors by keeping our own financial affairs reasonably well organised and documented.The rest is then dealing with the financial institutions holding the deceased's assets and liabilities and, if necessary, HMRC and the Probate Registry.

Executors can always seek advice from a professional, if there is any aspect of the process that they feel uncertain about. There is also plenty of good advice available for free on the internet.

Whether probate is necessary is determined by several factors: the size of the estate (the state wants to ensure that it gets its cut if IHT is due), whether property is involved (it cannot be sold otherwise) and by the institutions holding the deceased's financial assets - they each have their own rules.

If probate is necessary, there are (or were when I last applied for it) two different processes involved dependent on the size of the estate. IIRC the simpler process combined the probate application with the HMRC form declaring the size of the estate. Larger estates (I think the lower limit was £200k-ish) requires HMRCs full IHT400 form to be completed first and then once HMRC has been dealt with probate is applied for.

Irrespective of the details, I remember being struck by the thought that it was all clearly designed to ensure that the state got any cut due before the beneficiaries.

[Lootman]

Irrespective of the details, I remember being struck by the thought that it was all clearly designed to ensure that the state got any cut due before the beneficiaries.

Agreed but I'd put it slightly differently. Probate is designed to ensure that creditors of the deceased and the estate get their cut before the beneficiaries get theirs. And of course HMRC is one of those creditors. Therefore it's helpful to uncover those creditors during the probate process, as well as identifying and valuing the assets and any gifts made in the prior 7 years.

So ironically probate exists as a benefit to everyone except the beneficiaries and immediate family!

An issue can arise if the estate can be distributed without going through probate, as may be the case here. If all assets will be released without probate then any creditors will not be paid off. It would then be up to them to initiate probate themselves, since the beneficiaries would have no reason to. In the case of HMRC, they have the ability to start an investigation if they think they've been stiffed.

In a technical sense, probate is never required because nobody can be forced to initiate it. But usually the beneficiaries push for it because they want their money.

[hiriskpaul]

Thanks for all the feedback. I found out today that the estate is bigger than previously thought, with close to £100k sitting in a Lloyds current account, earning no interest. My friends mother has had her care home fees paid by the NHS for the last 18 months. Consequently her pension has been going in and nothing going out. Goodness knows what the POAs were thinking of letting such a sum sit in a current account all that time, above the FSCS limit and earning no interest. Anyway, due to the size of the account probate is definitely required as Lloyds insist on it before allowing access to balances over £50k.

I have also found out that all beneficiaries are executors and there are no other executors.

I was not suggesting I apply for probate by the way, just help guide my friend through it, although I am sure she is quite capable of doing so herself. To me this all looks very straightforward. All accounts are known about, there are no insurance policies, property, investments or debts. No money has been gifted within the last 7 years. The deceased was a basic rate taxpayer and so I think it highly unlikely any income tax will be due (or reclaimable) and certainly no inheritance tax.

[Lootman]

I found out today that the estate is bigger than previously thought, with close to £100k sitting in a Lloyds current account, earning no interest. My friends mother has had her care home fees paid by the NHS for the last 18 months. Consequently her pension has been going in and nothing going out.

Usually it is not the NHS that funds care home provision but the local authority.

Moreover as a condition of the LA funding the care home, they typically want to know all about the assets of the person going into care, and typically require those to be used to partially or totally fund that care. Moreover any pension coming in is also used to defray the public funding.

Something sounds a little funny here.

[melonfool]

I found out today that the estate is bigger than previously thought, with close to £100k sitting in a Lloyds current account, earning no interest. My friends mother has had her care home fees paid by the NHS for the last 18 months. Consequently her pension has been going in and nothing going out.

Usually it is not the NHS that funds care home provision but the local authority.

Moreover as a condition of the LA funding the care home, they typically want to know all about the assets of the person going into care, and typically require those to be used to partially or totally fund that care. Moreover any pension coming in is also used to defray the public funding.

Something sounds a little funny here.

No, my nan's was paid by the NHS for fifteen years, consequently she died with £250k.

It's not a 'care home' though, it's a nursing home. I would have expected state pension to stop during that time though, it does if you go into hospital after four weeks I think, so can't see why this wouldn't be the same (nan had a small widow's pension, plus proceeds from sale of her flat).

Mel

[hiriskpaul]

NHS Continuing Health Care will cover the entire care home fees. My mother in law has been receiving this for over a year. I still think she is receiving her state pension though, but may have lost health related benefits since moving on to the funding.

NHS CHC is quite separate from local authority funding and is not means tested. Essentially it is available for people who are so ill that they need full time nursing care and would otherwise be hospitalised. Someone does have to be very ill to get it though. "Normal" dementia is not sufficient.

[hiriskpaul]

My wife has confirmed that her mother still receives her state pension and Teachers pension. She is paying nothing to her care home. Prior to going on to the NHS scheme she was paying £850 per week, with the LA paying for the first 12 weeks. My understanding is that the LA would have picked up the tab once my mother in law had spent all but about £20k of her assets.

[Gengulphus]

An issue can arise if the estate can be distributed without going through probate, as may be the case here. If all assets will be released without probate then any creditors will not be paid off. It would then be up to them to initiate probate themselves, since the beneficiaries would have no reason to. In the case of HMRC, they have the ability to start an investigation if they think they've been stiffed.

Actually the issue of an estate being distributed without first paying creditors off can arise more-or-less independently of probate: with one exception, an executor who has obtained probate can do it just about as easily as one who hasn't. And the legal remedies for the creditors are the same: an executor who distributes the estate without first paying creditors off becomes personally liable for any shortfall that the creditors suffer - i.e. the shortfall becomes payable from the executor's own assets, not just from the estate assets. And the executor cannot escape that by then renouncing the role: by distributing the estate, he or she has "intermeddled" with the estate, and a condition for renouncing the role of executor is that one hasn't done so.

Alternatively, an executor who first renounces the role and then distributes the estate is purporting to transfer ownership of assets from the estate to others without any authority to do so, and is subject to the same legal remedies as anyone else who purports to transfer ownership of assets they don't own without authority to do so from the owner. Those would certainly include civil liability to anyone who loses out as a result, and I think could well include criminal liability as well. And of course, the same applies to anyone who takes on the job of distributing the estate without either being named as an executor in the will or being appointed as the estate's administrator in cases like intestacy, all executors renouncing the role or being unable to act, etc.

Whether probate has been obtained doesn't feature in any of that: an executor's authority over the estate assets exists from the moment of death and obtaining probate doesn't alter it. It's perfectly possible to distribute estate assets before obtaining probate even in cases where probate is needed, and quite usual to do it in at least minor ways: for instance, one generally wants to start clearing the deceased's house before one has obtained probate, that involves distributing its contents, and some of those contents will probably have some monetary value. And it's perfectly OK for an executor to do that before obtaining probate as long as either they're confident that the remaining assets in the estate will be enough to pay off creditors or they're willing to accept the possibility that they'll become personally liable for the value of the distributed assets.

What probate does do is act as official recognition of an executor's authority, that will generally convince people and organisations that the executor does actually have that authority. They can choose to be convinced in other ways (e.g. letters of indemnity), but they do take a risk in doing so: if they allow someone to act as an executor and it turns out that that person didn't have the authority (e.g. because there's a newer will naming someone else as executor), and that person becomes personally liable as a result but is unable to meet the resulting financial obligations, then they could end up bearing the loss... And so they limit the risk they're willing to take, e.g. by setting a maximum amount for which the alternative way of convincing them will work - and different organisations are quite free to set different maxima, as that basically just means different decisions about how much risk they're willing to take.

The one exception to that general rule about creditors being just as easily 'stiffed' by an executor with probate as one without probate is any immediately-payable IHT due to HMRC - and that's not due to the legal remedies being different: it's just that paying that IHT is a pre-condition for obtaining probate. Other debts of the estate, including other taxes due to HMRC (such as IHT payable by instalments or Income Tax incurred but not accounted for before death), are no different for executors with and without probate. And of course, when that exception does exist, the sums involved are large enough that it would be rather impractical to avoid the need for probate - one would need to split the assets up among at least about 15 independent accounts and not own a property to make an IHT-liable estate not require probate...

None of that affects the answer to this particular question, of course, since we now know that probate is required to get access to the estate's biggest asset. But my point is that if anyone is thinking that avoiding the need for probate might help the estate's beneficiaries get more at the expense of its creditors, the answer is basically that no, it won't: it will neither make it easier nor harder, and it won't alter what legal steps the creditors can take in response. There are other reasons to avoid the need for probate when practical, such as a wish to avoid unnecessary paperwork and delay, but that isn't one of them.

Gengulphus

[Lootman]

But my point is that if anyone is thinking that avoiding the need for probate might help the estate's beneficiaries get more at the expense of its creditors, the answer is basically that no, it won't: it will neither make it easier nor harder, and it won't alter what legal steps the creditors can take in response.

I don't think you fully understood what I was saying. I wasn't suggesting a stratagem for deceiving creditors or otherwise avoiding obligations. I was talking about procedural and practical differences between going through probate and not going through probate, where both are options.

My main point was that whoever is handling the estate and its assets (whether an executor or not) should include as part of their job the identification of liabilities as well as assets. If they fail to account for those debts and distribute all the assets (whether by design or by accident) then the creditors may still end up getting paid, but they will have to take independent actions themselves to be satisfied, as opposed to the probate process handling that. The process is different, more work is needed and the risk of not being able to collect goes up.

So there is a difference between going through probate and not going through probate. The former makes it less likely that debts will be missed because it imposes a formal process, with documentation, as well as personal liability, on the executor. If on the other hand a bank releases the assets to a relative purely on production of a death certificate, then it's quite possible that nobody would think to do the extra work that is needed to see if anyone is owed.

And this is even more the case where, say, the deceased gifted the asset prior to death, so there is no executor that the creditors could chase after and regard as personally liable. Similarly if accounts were held as joint tenants of if a POA had been used to transfer assets then, again, there is no executor to be held liable. In those cases the creditor may decide to take action against the attorney or the beneficiary, but it gets messier.

My personal experience is that creditors often write off small debts upon death, because chasing down such debts can appear to be callous. Larger debts would still be pursued, of course, but then those are the debts that are most likely not to be missed anyway

[Gengulphus]

But my point is that if anyone is thinking that avoiding the need for probate might help the estate's beneficiaries get more at the expense of its creditors, the answer is basically that no, it won't: it will neither make it easier nor harder, and it won't alter what legal steps the creditors can take in response.

I don't think you fully understood what I was saying. I wasn't suggesting a stratagem for deceiving creditors or otherwise avoiding obligations. I was talking about procedural and practical differences between going through probate and not going through probate, where both are options.

I'm sure you weren't intentionally suggesting that. Equally, I was (and am) sure that the words you actually wrote could be read that way, and thought I would save anyone who did read them that way the trouble of being tempted.

My main point was that whoever is handling the estate and its assets (whether an executor or not) should include as part of their job the identification of liabilities as well as assets. If they fail to account for those debts and distribute all the assets (whether by design or by accident) then the creditors may still end up getting paid, but they will have to take independent actions themselves to be satisfied, as opposed to the probate process handling that. The process is different, more work is needed and the risk of not being able to collect goes up.

And my main point is that you were confusing obtaining probate with paying the creditors - which you're still doing. The probate process requires the executor(s) to identify the creditors, but (with the exception of immediately-payable IHT owed to HMRC) it does not require them to pay the creditors.

And from the creditor's point of view, the process of collecting the debt if the executor fails to pay up, and the amount of work it involves, is the same whether or not the executor is obtaining probate. And in any case, the creditor is generally not the one making the decision about whether to obtain probate, so whether the creditor thinks it's the right thing to do doesn't actually matter in general. ("Generally" because there is the exception that if no-one else will take on the job of dealing with the estate, the creditors do get the option to do so.)

Gengulphus

[Clitheroekid]

And from the creditor's point of view, the process of collecting the debt if the executor fails to pay up, and the amount of work it involves, is the same whether or not the executor is obtaining probate.

From the point of view of a creditor's solicitor that is certainly not the case.

If a grant has been taken out it's very simple - you just sue the executor / administrator. But if no grant has been taken out there's nobody to sue.

As you say, it's theoretically possible for a creditor to take out a grant themselves, but in practice it's exceptionally difficult, if only because the creditor has no knowledge at all of the deceased's estate.

[Lootman]

And from the creditor's point of view, the process of collecting the debt if the executor fails to pay up, and the amount of work it involves, is the same whether or not the executor is obtaining probate.

From the point of view of a creditor's solicitor that is certainly not the case.

If a grant has been taken out it's very simple - you just sue the executor / administrator. But if no grant has been taken out there's nobody to sue

Yes, that expresses it much more succinctly than I did.

As ModellingMan and I originally noted, the probate process is designed to protect creditors, not beneficiaries. It's therefore not a controversial statement to observe that the absence of probate makes things more difficult for the creditors and, statistically, leads to worse outcomes for them,