Probate & trust administration can be complicated and time-consuming, particularly if the deceased’s estate is large. If you’re an executor or a trustee, there are a few things you’ll need to consider before managing these legal processes.
5 important aspects of probate & trust administration
1) Applying for probate
Before you do anything else, you’ll need to value the deceased’s estate. This valuation will form part of your probate application but it doesn’t need to be exact – just accurate enough to determine if there is any inheritance tax payable.
To work out the total, you should estimate the value of:
- their assets on the day they died
- any gifts they made in the seven years before they died
- any trusts the deceased benefited from.
This process can take several months or even longer depending on the size and complexity of the estate.
You’ll then need to apply for probate so you can distribute assets.
Only certain people can apply for probate. If there’s a will, the task will fall to named executors. If the deceased died without a will, the next of kin will need to apply for letters of administration before probate can be granted.
Once you have a grant of probate, you’ll have the authority to distribute the estate — but you’ll also have the responsibility of doing it properly.
2) Settling debts
Did the deceased have any mortgages, loans or overdraft debt when they died? Were there any outstanding bills for building works or solicitors? If so, you’re responsible for settling these debts as the executor of the will.
You’ll also need to apply for tax refunds, repay overpaid benefits and pay any unpaid income tax bills. In some cases, you may even need to submit a self-assessment tax return.
3) Inheritance tax
Inheritance tax can be complicated, particularly when a trust is involved. Various factors can affect the estate’s inheritance tax liabilities including:
- the type of trust used
- whether the person died within seven years of making a transfer
- whether the person made a “gift” into a trust but continued to benefit from it
- whether the trust was set up for a disabled beneficiary.
You won’t be able to distribute assets until you’ve paid the estate’s inheritance tax liabilities. Working with inheritance tax specialists can help ensure you pay the right amount.
4) New income
Sometimes assets will continue to generate income while you’re still dealing with the estate. These can come from:
- rental income
- business profits or shares
- interest on savings
- dividend payments on investments
If this happens, you may need to pay tax on any profits. You’ll also be responsible for calculating and paying income tax on the full amount received between the day after the person dies and the day you finish distributing their assets.
5) Distributing assets
Once all debts are paid and income accounted for, you’ll finally be able to distribute the estate’s assets.
Trustees and executors are entrusted to act in the best interests of beneficiaries. That means you must distribute the estate in accordance with the terms set out in the trust deed or will. After that, you’ll need to prepare and sign the final estate accounts.
It’s important to follow these terms and the law carefully when distributing assets to stay compliant and help avoid disputes. However, estate administration can be difficult to get right, especially if you’re grieving someone close to you.
As probate & trust administration experts, we can ease some of the pressure and help ensure you fulfil your loved one’s wishes while staying compliant.
Are you a trustee or executor of an estate? Talk to us to find out more about our probate & trust administration services.