When a friend or relative dies, you may need to act as their executor or administrator – taking responsibility for collecting their assets, paying off any debts and distributing what’s left to the beneficiaries named in the will. This can be a complex, time-consuming and sometimes stressful role. Read about the legal and practical issues you need to consider
Who are the executors?
If the deceased left a will, it is likely to name one or more executors who would normally take responsibility for sorting out the deceased’s financial affairs, provided they are willing and capable. There can be between one and four executors, though two is most common.
Searching the Certainty National Will Register can help you check whether there is a will and that you have the most up-to-date version.
Executors must be over 18 and of sound mind. They are usually trusted friends and/or relatives, although a professional person may have been named. An executor is often also a beneficiary under the will.
Where there is more than one executor, the executors are jointly responsible for administering the estate (the deceased’s property and possessions). It is normal for one executor to take a leading role. The executors may also decide to appoint a solicitor to give them advice and handle paperwork.
If there is no will, or the will does not name any executors, or none of the named individuals agree to act as the executor, then a beneficiary can apply to become an administrator in order to administer the estate. Priority is given to the closest adult relative – starting with the spouse (or registered civil partner).
Using a professional adviser
Most executors and administrators use solicitors or specialist estate administration providers for help or advice on dealing with the estate. The support available includes applying for the Grant of Probate, dealing with probate paperwork and formalities, advising on tax, selling the assets and paying off the debts, dealing with distributions to beneficiaries, and preparing estate accounts.
If you are an executor, it’s particularly advisable to work with a professional if:
- the estate is large
- the estate includes a business, or agricultural property, or overseas assets
- there are family trusts
- there are large gifts to children under 18
- there are illegitimate relatives
- the beneficiaries want to agree to a variation of the will (or their entitlement under the rules of intestacy) – for example, to reduce inheritance tax
- there may be a challenge to the validity of the will
- there are relatives or dependants who may claim that the deceased did not make reasonable financial provision for them
- there are likely to be untraced beneficiaries
- the will is ‘home-made’ or badly drafted
Wills usually authorise a professional to charge their professional fees to the estate, but not other executors (who can only reclaim their expenses). Get an estimate of fees before instructing a professional. Some charge a fixed fee. Others charge an hourly rate or a percentage of the estate value.
Initial arrangements for an executor
The first steps following an individual’s death include obtaining a medical certificate showing the cause of death, registering the death, locating the will, and making funeral arrangements. Normally a close relative or an executor will take responsibility for organising these. See our guidance on what to do when someone dies.
As an executor, you should check the will (and any other documents) to see whether the deceased left any funeral instructions – though these are not binding. You should also check whether the deceased had made any arrangements for dealing with funeral expenses (perhaps they had a pre-paid funeral plan). Whoever arranges the funeral will be responsible for paying for it, but reasonable funeral expenses can be reclaimed from the deceased’s estate.
In practice, you may want to get in touch with close relatives and other major beneficiaries. Keep them informed to minimise tensions or potential disputes.
Managing the estate
Unless the deceased’s estate is small and straightforward, as executor you may find it complicated to deal with. To start with, you need to identify all the financial affairs to be dealt with.
- Contact the deceased’s bank(s) as soon as possible. They can freeze any bank accounts and will be able to provide you with a list of Direct Debits or standing orders related to the account. (You can also check through past bank statements.)
- Make sure you have several copies of the death certificate. Almost everyone you deal with will want to see one. In most cases, this will need to be an official copy (provided by the Registrar of Births, Marriages and Deaths).
- Check through paperwork to help identify organisations you need to contact. These may include:
- financial institutions – banks, building societies, investment managers, life insurance companies, registrars named on any share certificates
- any sources of income – employer, pension provider, social security office, any trust of which the deceased was a beneficiary
- HM Revenue & Customs – for income tax and National Insurance
- insurers – car, home and any life insurance policies
- suppliers and landlord – utilities (phone, power etc) and rent
- loans and credit – credit cards, hire purchase agreements etc
- business financial contacts – if the deceased was self-employed
- Consider advertising for unknown creditors or beneficiaries. You may want to advertise the death locally and in the London Gazette, giving creditors and beneficiaries two months to make themselves known. This helps protect you against future claims.
- Start a file to keep track of what needs to be done about each different organisation.
- Some organisations may want you to provide a copy of the ‘grant of probate’ (see below) before releasing money or other assets.
- Some banks and building societies may be willing to release funds for specific purposes. For example, it may be possible to have payments made towards funeral expenses, probate registry fees and inheritance tax liabilities.
- Banks and building societies may also release relatively small amounts (eg up to £5,000), particularly where the total value of the estate is small. You may need to produce a statutory declaration, or to sign an indemnity (guaranteeing to repay the money if it turns out that it should not have been paid out).
- Normally, any money in a joint account automatically passes to the other account holder, who can access it immediately. The deceased’s share may still be liable to inheritance tax.
- Control of other joint property (eg a house) passes automatically to the joint owner only if the property was owned as ‘joint tenants’ – otherwise, the deceased’s share must be dealt with by the executors just like other assets. In either case, the deceased’s share may be liable to inheritance tax.
- Payments from pension schemes and life insurance policies will depend on the individual circumstances. For example, some pension schemes (and life insurance policies written in trust) may just need to see the death certificate before paying death benefits or a spouse’s pension; others may not pay out until probate has been granted.
- Creditors will want payment, but may be prepared to wait. If funds are available, the simplest course may be to pay them immediately, provided that the executors are sure that the estate will have sufficient funds to pay all the creditors.
- Either the executors or someone else will need to take responsibility for paying continuing bills: for example, where the spouse continues to live in the house and becomes responsible for utility bills etc.
- Make arrangements to ensure that property and other assets are properly looked after until they can be sold or distributed. Practical points include ensuring that:
- vacant property is secured and protected against extremes of weather
- valuable items are safely stored
- adequate insurance is in place for properties and other assets (the deceased’s insurance may well no longer be valid)
- You will probably want to open a new bank account to handle all the money relating to the estate. This helps you keep the estate finances separate from your own and makes it easier to keep track of everything.
- Monitor the post and keep following it up.
- You may need to return any payments received (eg social security or pension payments), explaining what the situation is.
- You may identify new assets or debts that need to be dealt with.
Dealing with inheritance tax as an executor
Once you have got to grips with the finances, you should be in a position to deal with inheritance tax (IHT) if applicable.
The first step is to value the estate. Different assets may need to be valued in different ways:
- Valuing bank accounts etc is straightforward – just check the balance on the account.
- Most financial assets – such as shares – are easy to value. If investments were held with an investment manager (eg in an ISA), the manager can normally provide a valuation, though some may charge a fee.
- You can normally estimate the value of personal and household goods, though you may need to get a professional valuation for items worth more than £500 if you can’t get an accurate estimate otherwise. The valuation should be based on the sale value of the assets (which may be substantially lower than their insurance value).
- You would normally get a professional valuation of any substantial asset (eg a house). If you choose to estimate the value yourself, you must take reasonable steps to get an accurate valuation. Again, the valuation should be an open market sale value.
- Gifts or payments into trust made during the seven years prior to the death may also need to be included in the value of the deceased’s estate, unless they are covered by an exemption.
- You can deduct the value of any legally-enforceable debts (eg mortgage, outstanding bills) owed by the estate, and the funeral expenses, from the total value of the assets.
All valuations should be the values at the date of death. If assets are subsequently sold for less than the value on which IHT was calculated, you may be able to claim a reduction in the IHT payable.
Once the estate has been valued, you need to submit the appropriate forms to HM Revenue & Customs (HMRC) if applicable.
IHT will only be payable if the value of the estate is over the IHT threshold (currently £325,000) and does not meet the excepted estate requirements.
Since April 2017, main properties that are passed to direct descendants (children, stepchildren and grandchildren) have also qualified for an additional nil-rate band (the allowance was £100,000 in 2017/18, £125,000 in 2018/19, £150,000 in 2019/20 and is £175,000 from 2020/21 to 2027/28).
This will give a potential inheritance tax threshold of £1 million for married couples from 2020/21, but the additional nil-rate allowance gradually reduces for estates with a value of over £2 million, down to zero.
If IHT is payable, it becomes due six months from the end of the month in which the death occurred. Interest is generally charged on any outstanding balance from that date. The IHT due on houses, land and some other assets can be paid in instalments over 10 years (plus interest). The full amount of IHT becomes immediately payable if the asset is sold.
Until HMRC is satisfied that the IHT (excluding any instalments that have been agreed) has been paid, the executors cannot obtain probate. This means that the executors will not be able to sell off assets such as a house and distribute the estate to the beneficiaries. In some cases, this may mean the executors need to arrange a loan in order to meet the immediate IHT liability before being able to access the remaining assets.
Unless the estate is small, you normally need to apply to the Probate Registry for a ‘grant of probate’ (if you are an executor) or ‘letters of administration’ (if there was no will, or the will was invalid, or the will did not appoint executors). This gives you the legal authority to deal with the estate, and will be accepted by organisations such as banks as proof that you have the authority to collect money and other assets. Both a grant of probate and letters of administration are known collectively as a ‘grant of representation’.
Normally, one or more of the executors named in the will applies for the grant of probate. Otherwise (if the person died without a will or the will did not appoint executors) a beneficiary or relative can be the administrator and can apply for letters of administration.
Where the executors are applying for probate, they can decide whether they all wish to do so jointly:
- If several executors apply together, all of them will need to sign documents to deal with assets.
- The executors can agree that one or more of them will apply – and deal with the estate – while the others reserve the right to apply later if necessary.
- Individual executors can choose to renounce their rights to probate altogether (and have no more to do with the administration of the estate) as long as they haven’t already started to administer the estate.
- Normally, a single individual can apply for the grant of representation. However, in some circumstances, at least two are needed (eg when there is no will and children under the age of 18 will inherit part of the estate). The maximum number is four.
Applying for the grant requires completing the appropriate form, either online or by post, and providing the will (and any ‘codicils’ altering the terms of the will), death certificate, inheritance tax paperwork and the probate application fee. You can apply yourself or through your professional adviser. You then need to complete a statement of truth confirming the information you have given. You may be asked to attend an interview at the probate registry if they have any queries.
Distributing the estate
Once probate has been granted, the executors (or administrators) have the authority to deal with the estate. Typically, this involves:
- collecting money and assets
- selling assets (unless the assets themselves are being passed on to beneficiaries)
- paying debts and taxes
- distributing the estate
The executors should ensure that they pay any debts and taxes before distributing the estate. A negligent executor could become personally liable for unpaid debts and taxes.
The executors must distribute the estate in accordance with the will. If there is no will, the estate is distributed according to the rules of intestacy. The shares depend on the amount of the estate, whether the deceased was married (or in a civil partnership) and whether there were any children.
If all the beneficiaries agree, the terms of a will (or intestacy) can be varied for up to two years following the death. This may have advantages (eg reducing likely tax liabilities) but legal advice should be taken.
The executors should keep clear records of what they have done, so that they can answer any future questions or challenges over their administration of the estate.
Note: This guidance applies to England and Wales only. Different rules and procedures apply in Scotland and Northern Ireland.
DISCLAIMER: This article should not be regarded as constituting legal advice in relation to particular circumstances, and is merely a general comment on the relevant topic. If specific advice is required in connection with any of the matters covered in this article, please seek the services of a legal professional.