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Managing an Estate

The 2nd anniversary of a person’s death can be an important administrative milestone for two reasons.

  1. It is the cut-off date for any Deed of Variation to be signed in the estate. This is a document that changes the way in which the estate has been divided under the Will or intestacy provisions. There are a number of reasons why beneficiaries may enter into a Deed of Variation, including to resolve inheritance claims without going to court, to reduce the inheritance tax bill, or as part of the beneficiary’s own financial planning. Inheritance legislation allows a variation to be ‘read back’ to the date of death but only if created within 2 years of the death.
  2. Often, Wills which do not create an express trust arrangement still have to be registered with HMRC via the Trusts Registration Service. Whilst expressly created trusts must be registered within 90 days, estates which create a bare trust only have to be registered if the estate has not been finalised at the 2nd anniversary.

If you inherit a large amount of money then you should;

  • obtain advice from an independent financial advisor for your own financial planning;
  • review your own Will with a specialist Solicitor. This is because a windfall could alter your own inheritance tax position and may affect how you would wish to distribute your estate on death.

Their responsibilities include:

  • Gathering full information about the assets and liabilities in the estate;
  • Providing a full inheritance tax account to HMRC (where inheritance tax is due to be paid;
  • Paying the inheritance tax due out of the estate;
  • Dealing with the funeral arrangements and arrangements for the deceased’d body;
  • Collecting in all of the real and personal estate;
  • Maintaining the assets safely, once collected in;
  • Paying all liabilities within the estate (where the estate is solvent);
  • Where required to do so, delivering a full inventory and account of the estate to the court;
  • The duty to invest the assets where the estate will not be distributed for some time;
  • The duty to preserve the deceased’d business by carrying it on for a short period of time until sale (if express power is granted in the Will to do so);
  • Acting with due diligence. Estate Personal Representatives are bound by the same statutory duty of care as Trustees.

In some circumstances, unfair distributions or disagreements between beneficiaries can be resolved amongst themselves. Any agreement can then be finalised as a Deed of Variation, to change the way in which the estate is distributed under the Will (or under the intestacy provisions if there is no Will). Our Probate team can provide specialised advice in relation to Deeds of Variation.

If there is disagreement which cannot be resolved or if one or more of the beneficiaries are under the age of 18, then a court application will be required. Depending on the nature of the disagreement, one or more beneficiaries may make a claim to court for provision (provided they meet the eligibility criteria under the Inheritance (Provision for Family and Dependants) Act 1975.) Our Litigation team can provide advice and representation in these disputes.

A Will can contain specific legacies which are defined, specific amounts of money or assets gifted to one or more beneficiaries. A Will should also set out how the residuary estate is to be divided. The residuary estate is the remaining funds left over after all inheritance tax, funeral costs, estate expenses and any liabilities owed by the deceased are repaid, and after any specific legacies have been paid out.

Beneficiaries of the residuary estate are entitled to receive an inventory and account of the estate once the administration is complete. The inventory and account is dealt with as a set of Estate Accounts which are signed off by the Executor/Administrator of the estate.

There is no set time limit for the estate to be settled and paid out to the beneficiaries.

Section 44 Administration of Estates Act 1925 states that “subject to the foregoing provisions of this Act, a personal representative is not bound to distribute the estate of the deceased before the expiration of one year from the death.”

This means that a Personal Representative cannot be forced to distribute the estate before the first anniversary of death. Even after the expiry of that year, a court would not order the Personal Representative to distribute the estate where they can show there are good reasons for retaining the assets and that they are acting honestly.

However, the Personal Representative are not obligated to keep hold of the estate assets until that one year has passed. If the estate is ready to be distributed, then the remaining estate can be paid out to the beneficiaries.

Some of the difficulties that can prevent the estate from being settled within that year include;

  1. Liabilities not being immediately identifiable;
  2. If there is no Will, there can be multiple people who are entitled to apply for Probate and this can cause disputes if agreement cannot be reached;
  3. In cases where there is no Will, there can also be problems with identifying who has that power to apply for the grant;
  4. Problems with one or more clauses in the Will (issues with interpretation or validity);
  5. Delays in obtaining necessary information and access to assets (particularly where there are assets located outside of the UK).

If we were appointed in the Will to act as Executors or you instruct us to manage the Probate and estate administration for you, then we will charge legal fees for the work we carry out. Our fees are always agreed with you in advance and where we are charging an hourly rate, we will provide you with a cost estimate at the outset and keep you updated on that cost estimate.

Where any law firm or bank is instructed to manage an estate, the fees that will be charged to the estate will be set out in that firm’s terms of business and agreement with you. Legal costs in dealing with the estate administration are legitimate costs from the estate and should usually be covered by estate funds. You may be asked to cover initial costs (such as the court fee for the Grant of Probate) where assets cannot be accessed without the Grant.

  • Power to carry on a business (provided there is authority in the Will) (power to postpone sale);
  • Power to gather the necessary information about the estate, deliver that information to HMRC (using the full account if required) and paying the IHT due;
  • Power to deal with the deceased body (this responsibility falls first on the Personal Representatives of the estate);
  • Once the Grant of Probate/Letters of Administration is issued, the Personal Representatives have the power to collect in all the real and personal estate and to administer it according to law.

This list is not exhaustive. The Personal Representatives have a multitude of additional powers created by legislation or by the Will. This could include the power to charge fees (if acting as a professional executor), the power to invest, or the power to take into account gifts made to a beneficiary during the deceased’s lifetime when calculating how much that beneficiary should receive under the Will.

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