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Daniel Curran advises Charted Institute of Legal Executives

Probate-what do you need to know

 

Chartered Legal Executives now have freedom to conduct probate services without solicitor supervision, with authority from CILEx Regulation. Nicola Laver considers what this means in practice, and what Chartered Legal Executive probate practitioners need to know

Dealing with the administration of a deceased estate can be a simple process, but in some cases it will be highly complex. What can begin as a straightforward administration can quickly become complex, particularly if a dispute arises during the matter.

Probate and administration is not a notably dynamic area of law by any means. However, understanding some of the legal issues that can crop up and decelerate an estate administration is critical. Chartered Legal Executives with probate practice rights must be familiar with these issues to enable them to give the best possible service to their clients, and minimize the risk of problems with beneficiaries – and potential claims.

Daniel Curran, founder of Finders International, comments:

‘‘Probably the most frequent issues we come across are the time taken for an estate to be wound up and distributed; the division of the estate in terms of intestacy law; and how to deal with overseas assets and cross-border estates’

The basics

When someone dies, their property and assets must be collected in and distributed in accordance with the terms of the deceased’s will, or under the statutory rules of intestacy if there is no valid will. All estate debts must first be paid off before the net estate can be distributed among the beneficiaries.

The deceased’s personal representatives (PRs) are responsible for the administration of the estate. Unless the estate is classed as a ‘small estate’ (i.e., less than £5,000) a grant of representation must usually be obtained from the court before the administration of the estate can be undertaken by the PRs.

There are three grants of representation:

The application to the court for the grant is made by the executors appointed in the will or, in the absence of a will, by one or more individuals seeking to deal with the estate. Those entitled to apply where there is no will are the surviving spouse, then the deceased’s children, and if none are surviving, then any grandchildren of the deceased.

The application of court must be accompanied by the appropriate ‘oath’, which includes an estimated of the net value of the estate. Where inheritance tax (IHT) is payable on the estate, some may be required to be paid before the grant of representation is issued.

Where executors (the PRs) are appointed in the will, they already have legal authority to deal with the administration; the grant of probate confirms that authority. On the other hand, the letters of administration give the authority to the PRs.

PRs’ duties and responsibilities

The PRs have a number of legal and administrative duties and obligations during the administration of the estate.

Note that the PRs are the trustees of estate property and their responsibilities include the following:

Intestacy

Until 2014, the statutory rules of intestacy under the Administration of Estates Act (AEA) 1925 have remained static, setting out, in strict order of familial relationship, the individual(s) entitled to inherit the deceased’s property and assets in the absence of a valid will.

Recent developments

Important new changes under the Inheritance and Trustee’s Power Act 2014 (which came into force 1 October 2014) have altered the AEA intestacy rules as follows:

  • Where there are no children, the surviving spouse/civil partner will inherit the entire estate. (Under the old regime, the survivor only inherited the first £450,000, with the remainder passing to other surviving relatives)
  • Where there are children, the surviving spouse/civil partner will inherit the chattels, the first £250,000 (the ‘fixed net sum’) together with an interest in half the residuary estate over £250,000 absolutely. The children receive the other half of the residue on reaching 18…

Protection under Trustee Act 1925 s27

‘Lost’ beneficiaries pose particular challenges for PRs. What, for instance, might happen if there is a beneficiary of whom you are unaware, the administration of the estate is completed, and later a beneficiary emerges demanding a share of the deceased’s estate? The PRs could be held personally liable to that beneficiary.

Section 27 of the Trustee Act 1925 gives the PRs an important route to avoid liability by placing notices in local and national newspapers setting out details of the estate and their intention to distribute the assets, requesting anyone believing that they have a reasonable claim against the estate to contact them. If no one has come forward within a two-month period, the PRs may then distribute the assets of the estate to the claims of which they had notice.

Indemnity insurance should also be taken out (some firms take out insurance instead of going down the statutory notice route (you should check your firm’s policy).

As Daniel Curran comments:

‘‘Missing beneficiary insurance policies can remove the need for any advertising for heirs who cannot be traced. A simple policy can save a vast amount of time and disproportionate expense’

There are also potential issues of cross-border and ‘missing-assets’, which can cause problems.

Daniel Curran adds:

‘We can also repatriate assets from abroad, and find additional assets in the UK, USA and Australia. Asset repatriation, and the time it takes, is often grossly underestimated by those administering an estate, and if a medallion signature guarantee or a reseal of grant is required, these can take 12 to 24 months. It is always our advice to let us help with these at the earliest possible stage, but there is a natural and understandable tendency to put these aside until later on in the process, which can make matters worse.’