Probate work is handled primarily by Associates and concerns the administration of the estates of deceased persons and the ancillary aspects which that involves. Often the individual who has died will have been a client of the firm during his or her lifetime. The administration of estates may involve particularly complex areas of tax law and/or other areas of law, and it is usually a partner or a member of the Private Client team who will provide the additional input on those areas where required.
KEY STAGES OF WORK IN THE ADMINISTRATION OF AN ESTATE
Initially it will have to be established if there is a valid Will and in the event that there is no Will or the Will is invalid, the estate will fall to be distributed in accordance with the statutory intestacy rules. It needs to be established at the outset who is or are the executor(s) of the Will who are prepared to take responsibility for giving effect to the Testator's wishes or who will be the administrator(s) of the estate in the case of the estate of an intestate individual. In what follows, the executors or administrators are referred to collectively as the personal representatives ("PRs").
It will be the responsibility of the PRs to identify all debts which the deceased owed at his death and often statutory advertisements will be made under the Trustee Act 1925 to establish if there are any creditors whose existence are not known to the PRs. In addition it will be necessary to establish what assets are comprised within the estate and to establish the value of each of those assets as at the date of death. This will normally involve correspondence with all relevant persons to establish such a value. In the case of certain assets, such as buildings, land and unquoted shares, it will be necessary to appoint a valuer with the appropriate skills to provide such values for those assets.
Once all the above have been collected together, we will assist with the application to the relevant Probate Registry so that the authority of the PRs to administer the estate can be confirmed or conferred by the court. This in turn will enable the PRs to make title to the estate assets which will be accepted by all relevant third parties. A Witness Statement will be prepared for signature by the PRs, and lodged with the Probate Registry. At the same time we will complete the appropriate form of Inheritance Tax ("IHT") account setting out details of the values of all assets comprised in the estate and details of all debts owed by the deceased and deductible liabilities, such as funeral expenses. This in turn will enable the IHT liability to be computed. That tax, or a proportion of that tax, will need to be paid before a Grant of Probate or Letters of Administration, known collectively as a Grant of Representation (the "Grant") is issued by the relevant Probate Registry. Having regard to the fact that generally estate assets will not be able to be collected in or realised until the issue of a Grant, advice will be given as to how that liability can be funded at that stage, from assets within the estate under the so-called Direct Payment Scheme, by way of loan or otherwise.
Once a Grant has been issued, we will assist the PRs to call in the estate assets and to effect any sales of assets, which will raise the necessary funds to enable all debts owed by the deceased to be discharged and to meet the cost of any testamentary and administration expenses, including the payment of IHT and any other taxes. We will assist the PRs in ascertaining, identifying and locating the relevant beneficiaries, whether named in a Will or taking under the rules of intestacy. We will assist the PRs in the appropriation of particular assets to such beneficiaries, and/or effecting the distribution of the proceeds of sale of such assets. We will secure that all branches of HMRC will accept that payments have been made to discharge in full any tax liabilities, such as any pre-death Income Tax or Capital Gains Tax, IHT on the estate and Income Tax and Capital Gains Tax on income and gains received or realised during the estate administration. We would ensure that any income distributed to a beneficiary is vouched out to the relevant beneficiaries setting out the amount of Income Tax discharged before receipt, which information will be required by the beneficiary in completing his or her own personal tax return.
The final aspect will be the preparation of estate accounts giving details of all information relating to the estate and setting out how the estate is to be distributed amongst the beneficiaries under the terms of the Will or the statutory intestacy rules. Those accounts will be approved by the PRs. In appropriate cases, interim estate accounts will be prepared in the course of the estate administration, so that it will be seen what steps have been taken in the administration of the estate to that date and it will highlight the remaining areas which need to be resolved.
COMPLICATIONS IN PARTICULAR CASES
Certain estates can give rise to particular problems and difficulties, or indeed opportunities, which will involve additional time being spent over and above the work normally required in the administration of an estate:
LIKELY TIMESCALES FOR THE KEY STAGES OF THE WORK
1. The Application
The work involved at this stage will vary according to whether there is a valid Will, the size of the estate, the nature and location of the assets, and the ease with which they can be identified and valued. In many cases, we may be relying on other agencies, e.g. valuers or accountants, or indeed donees of lifetime gifts, for the provision of necessary information. In simple cases, a Grant may be obtained within 2-3 months from death. In more complex cases, a Grant may take 3-6 months to deliver.
2. The Administration
Variations at this stage can be even more pronounced, according to the complexity of the estate and what enquiries are raised by HMRC on IHT and other pre-death tax issues, and their speed of response, as well as the ease by which the beneficiaries can be located and the estate distributed to them. In certain cases, distributions need to be deferred until the expiry of six months from the date of the Grant, in order to protect PRs from personal liability (to the extent that distributions have passed through their hands) in the event of a successful claim under the Inheritance (Provision for Family and Dependants) Act 1975. In addition, if estate assets are to be sold or transferred, the timescale for this stage will need to factor in the time required for such sale or transfer. In simple cases, assuming there is no reason to defer distribution, this stage may take 3-6 months from the date of the Grant. In more complex cases, this stage may take 6-12 months, depending on the resolution of the particular issues involved.
As noted above, in appropriate cases, interim estate accounts may be produced during the Administration stage, and the final accounts when the Administration stage is completed.
The firm charges primarily by reference to the amount of time spent by the relevant fee earners. The main bulk of the work will be carried out by Andrew Crossley and Sian Mckay, whose hourly charging rates are £550 and £300 respectively (plus VAT in each case). Depending upon the nature of the estate there may be some involvement from other members of the firm who may be asked to assist. The hourly charging rates for other members of the team range from £275 to £325 (plus VAT). All of the above figures exclude VAT (currently at 20%) and are correct as at 1 June 2021.
When the firm begins work on the estate administration, it will seek to give an indication of the likely fees for handling the estate administration and if particular problems or difficulties arise along the lines indicated above, the figure quoted may need to be altered and brought to the attention of the PRs. In appropriate cases we will provide an indication of the likely charges for all work done up to the issue of a Grant, by reference to the specific circumstances of the case, and a further indication at that stage, or at monthly or agreed or appropriate intervals thereafter, to cover the work from the issue of the Grant up to the completion of the estate administration. Experience has indicated that if one is concerned with an estate falling between £1m and £3m, the overall charges are unlikely to exceed 3% of the value of the estate. If the charges were to exceed that level, one would expect to find particular problems or difficulties which had to be resolved over and above what one would expect to find in a straight forward estate administration. One would not expect the charges to reach such a percentage in the case of very significant estates. It is not necessarily correct that a significant estate can give rise to more significant problems than an estate of more modest size. Work done on the sale or transfer of particular assets, or to take advantage of post-death tax planning opportunities would not normally be included in the general retainer relating to the estate administration and would be costed out separately and by agreement with the PRs and/or beneficiaries.
The administration of an estate may include certain additional costs that are payable to third parties. In most cases, these will be met from assets within the estate. On occasion, the firm may be prepared to fund these costs on behalf of the PRs, on an interim basis. In that event, such costs would be added to our charges as a disbursement. These might typically include:
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