What is probate? – A step by step guide
Probate is a word that many people will have heard, but few have a clear understanding of what it really is or the role it plays when a loved one passes away.
In this guide
- What is probate?
- What is the process for probate?
- How long does probate take?
- How much does probate cost?
- What happens after you’ve applied for probate?
- Can you sell a house before probate is granted?
- What happens to an inherited house during probate?
- What is a probate valuation of house?
- What happens to a house after probate has been granted?
What is probate?
Probate is the legal process of dealing with someone’s property, possessions and finances (collectively called their ‘estate’) after they have died.
Probate will be required before any inheritance can be distributed, or property can be sold or transferred.
What is the process for probate?
First, you need to find out whether probate is required. This will depend on a few factors.
If all the deceased person’s assets (their money, property etc.) are jointly owned, they will usually pass directly to the surviving owner without any need for probate.
Probate also may not be required if the person who died only had savings.
Who should apply for probate?
If probate is required, it will be the executor of the Will’s responsibility to apply for it. If there is no Will, the closest living relative can apply for probate instead.
If you need help in applying for probate, you can hire a probate practitioner. This will usually be a solicitor or accountant.
What is the role of an executor?
Before applying for probate, the executor of the Will needs to gather details of all the estate assets and any debts. This will enable them to estimate the value of the estate and calculate whether inheritance tax is payable; something that is required before probate can be applied for.
To access information about the deceased person’s accounts, the executor will need to write to organisations such as their bank, any mortgage lender, credit card companies and utility providers. You will need to provide a copy of the death certificate and ask for the value of the asset or debt on the date the person died.
Inheritance tax is unlikely to be payable if:
- The estate all passes to the spouse or civil partner of the deceased
- The estate all passes to a charity
- The estate is valued below the inheritance tax threshold of £325,000
What needs to be included when calculating the value of a person’s estate?
When you’re calculating the value of someone’s estate, you don’t just have to consider their assets, but also any financial gifts above the £3,000 annual allowance that they have made in the last seven years. Details of any gifts should be found by looking at previous bank statements. As part of your estate calculations, you should make a note of any gifts. You will need to note the value of the gifts and the date they were made.
You don’t need to include any debts into your calculations when estimating the value of the estate, but you should provide details separately.
What do I do once I’ve estimated the value of the estate?
You don’t need to include any debts into your calculations when estimating the
Once you’ve gathered all the details and estimated the value of the estate, you need to inform HMRC.
If any of the following apply, you should complete an IHT205 form:
- There is no inheritance tax to pay
- Everything has been left to a surviving spouse or civil partner, or to charity and the estate is worth less than £1 million
- The estate is worth £650,000 or less and the full unused inheritance tax threshold has been transferred from a spouse or civil partner who died first
If any of the following apply, you should complete an IHT400 form:
- The value of the estate is above the inheritance tax threshold (currently £325,000)
- The deceased gave away over £150,000 in the 7 years before their death
- They gave gifts that they continued to benefit from in the 7 years before they died, eg. if they gifted a property that they continued living in
- If the deceased inherited part of the inheritance tax threshold from a previous spouse or civil partner.
- If they had foreign assets worth more than £100,000
- If they held assets worth more than £150,000 in trust.
These forms must be submitted to HMRC within 12 months of the death.
You can find guidance on how to complete these forms on the government website.
Once you have estimated the value of the estate and worked out any inheritance tax liability, you can apply for probate.
You can apply for probate either online or by post.
How long does probate take?
The entire process typically takes between 6 months and a year. How long it takes will depend largely on how complex the particulars of the estate are.
How much does probate cost?
If you apply for probate yourself, you may be required to pay a probate application fee. If the estate is valued at more than £5,000 there will be a £215 application fee. If the estate is valued at less than £5,000 applying for probate is free.
When you hire professional help with applying for probate, the cost will depend largely on the size and value of the estate and how complex the case is.
Some companies will give you a fixed quote at the start of the process, whilst others will charge you a percentage of the value of the estate.
What happens after you’ve applied for probate?
After you’ve applied for probate, the death certificate will be returned to you, but the Will will be kept by probate and become part of public record.
You will then receive either grant of probate, if the deceased left a Will, or letters of administration if there wasn’t one. Either document will allow you to start dealing with the estate.
You need to pay any debts before you start distributing the estate according to the Will. You can also use money from the estate to pay for any solicitor’s fees related to the probate process.
Can you sell a house before probate is granted?
No. A house cannot be sold until probate has been granted. You can market the house and find a buyer in that time, but a sale cannot complete until the probate process is complete.
What happens to an inherited house during probate?
Most people will have a life insurance policy that will clear any outstanding mortgage on the property, but if they don’t you can usually contact the mortgage lender and ask them to pause mortgage payments until probate has been granted. Interest on the mortgage will still be accrued during this time, but you can settle the account with the estate assets once probate has been completed.
You can also contact any other creditors (utility companies, council etc) with a copy of the death certificate and they should be able to pause any further payment until debts can be settled after probate.
What is a probate valuation of house?
Any property that is part of the estate will be valued as part of the probate process. This valuation will be used to calculate any capital gains tax due if the property is sold at a later date.
What happens to a house after probate has been granted?
Once probate has been granted, the estate can be distributed as per the Will. At this point, whoever has inherited the property can decide what to do with it.
If the property is jointly owned in a ‘joint tenancy’, the property will automatically pass to the other owner.
If they owned the property on their own, or as ‘tenants in common’ with another person, after probate has been granted their share of the property will be go to the beneficiary as per their Will.
The beneficiary may choose to sell the inherited property, rent it out or keep it to live in themselves.
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