What is a Grant of Representation?

What is a grant of representation?

A ‘grant of representation’ is the generic term for the legal order issued by the probate court in the estate of a deceased person in England and Wales. In Scotland a grant equivalent is called a ‘confirmation’. The grant gives legal authority to prove that the executor or administrator (the personal representative) can administer the estate, undertaking tasks such as signing sale contracts or transferring documents for property, closing bank accounts and selling shares.

Types of grant of representation

The two most common types of grant of representation are a ‘grant of probate’ and a ‘grant of letters of administration’:

  • grant of probate is issued when a person has left a will naming an executor (executrix if female) who proves the will through the probate court.
  • grant of letters of administration is issued when a person has not left a will and the person entitled under the rules of intestacy seeks authority to administer the estate.

When do I need a grant of representation?

 Although a grant gives a personal representative the authority to administer the estate, there are certain instances where action can be taken without a grant:

1. Assets passing to the personal representative

Under the Administration of Estates (Small Payments) Act 1965 (and Schedule 7 to the Building Societies Act 1986) the following can be paid out without a grant providing they have a maximum value of £5,000:

  • bank and building society accounts, national savings products, friendly society and industrial and provident society deposit accounts
  • arrears of salary, wages and superannuation benefits where the deceased was an employee of a central or local government department
  • pensions where the deceased was a member of the police, fire authority, air force or army

It should be noted that the legislative figure is £5,000 but for some banks and building societies this figure can be higher depending on their own internal regulations and requirements. Payment is at their discretion and they can insist on seeing a grant.

If a grant is required, it may be possible to release assets before the grant is received to settle the funeral director’s account and to pay any initial inheritance tax due on the probate application. These funds are generally released directly to the funeral director or HMRC and not to the personal representative. They can include:

  • personal assets such as personal effects, household property and cars. If these are not being sold, then they may need to be valued for inheritance tax purposes before being distributed in accordance with the will, letter of wishes or intestacy rules
  • cash

2. Assets not passing to the personal representative

  • Nominated assets – where the deceased has nominated a beneficiary of the asset with an institution, the asset will pass to them after sight of the death certificate.
  • Some jointly-owned assets – each owner has an indivisible share which passes automatically to the surviving owner(s). Care should be taken with property to check whether it is held as beneficial joint tenants which will pass automatically by survivorship or as tenants-in-common whereby the deceased’s equitable share will pass under the terms of their will or intestacy which will require a grant.
  • Gifts in anticipation of death (donatio mortis causa) – these are gifts which are made by an individual immediately before they die and are subject to four conditions. The deceased must have believed he was going to die soon, have made the gift on the condition that he died, have parted with the gift in some way, and the gift must be capable of being given away.

3. Assets which do not form part of the estate

  • Life insurance policies held in trust – these pay direct to the trustees of the policy.
  • Death in service benefit from an employer – this is usually a payment to either beneficiaries named by the deceased on a letter of wishes or at the discretion of the employers.
  • Lump sum pension benefits – this is usually a payment to either beneficiaries named by the deceased on a letter of wishes or at the discretion of the pension company.

Do I need a grant of representation?

 Administering the estate without a grant of representation may be possible in some circumstances and may save time and money, but it may also be beneficial to obtain a grant in any case to prove the deceased’s last will. It should be noted that claims issued under the Inheritance (Provision for Family and Dependants) Act 1975 must be made within six months from the date of issue of the grant, and this is a key reason for a personal representatives to obtain one.

If you have any enquiries in relation to the probate or a grant of representation, please contact our private client solicitors on 020 8240 9018 or submit the enquiry form on our website.

 

Changes to the Probate Application Process for Deaths on or after 1 January 2022

On 1 January 2022, The Inheritance Tax (Delivery of Accounts) (Excepted Estates) (Amendment) Regulations 2021 came into effect. The 2004 regulations were extended, so that the majority of non-taxpaying estates are no longer required to complete IHT forms in cases where a grant is required.

The new regulations serve to minimise the administrative burdens imposed on those dealing with IHT, by reducing the reporting requirements for excepted estates and limiting the circumstances in which full inheritance tax accounts must be delivered to HMRC. The new regulations, however, will only apply to estates or deaths that occur on or after 1 January 2022.

What are the main changes to the regulations?

1. Requirement to file IHT accounts

If you act for a person domiciled in the UK who dies on or after 1 January 2022 with an excepted estate (one in which no IHT is due), you are no longer required to submit an IHT205 form (and, if applicable, an IHT217 form) to HM Courts and Tribunals Service (HMCTS) as part of your probate application.

2. Monetary limits have been increased

Small estate

A small estate is one where the gross value is less than the IHT threshold. The value limits in relation to trust property (e.g. where the deceased was a beneficiary of a trust) and specified transfers (e.g. where the deceased made a gift in the seven years preceding their death that failed and became chargeable to IHT) has been increased from £150,000 to £250,000.

Exempt estate

Exempt estates have a gross value that exceeds the IHT threshold, but a net value that does not exceed after accounting for liabilities, exemptions and/or reliefs. As above, the value limits for both trust property and specified transfers have been raised to £250,000. However, the total value of trust property, including exempt amounts, is capped at £1 million. Furthermore, the gross estate limit for an exempt estate has been increased from £1 million to £3 million. This means that if the estate is less than £3 million in value and all assets above the IHT threshold pass to a spouse/civil partner/charity, the personal representatives (PRs) can apply to the probate registry for the grant without first submitting a form IHT400 to HMRC.

3. The reporting requirements have been reduced

Since the information required by HMRC for those who are UK domiciled has been significantly reduced, PRs are now only required to provide the following as part of the probate process: the deceased’s full name and date of death, whether they are claiming a transfer of the unused nil rate band of a pre-deceased spouse/civil partner; and the estate’s gross value, net value and net qualifying value.

What are some of the other changes brought about by the new regulations?

Qualifying non-domiciled estates:

A non-domiciled estate is an estate where the deceased was never domiciled in the UK. The regulations make it clear that an estate does not qualify as an excepted estate, and so there is a requirement to submit the full IHT400 report to HMRC, where the deceased owned indirect interests in UK residential property through a close company or partnership, or if the deceased made any chargeable gifts of UK assets totalling more than £3,000 in the seven years preceding their death.

The IHT threshold definition:

The definition has been extended to include cases where only a portion of the available nil rate band was used when the first spouse/civil partner died, and a claim is made to transfer the unused portion to the estate of the surviving spouse/civil partner. This means that PRs will no longer be required to use the IHT400 route if the entire nil rate band is not available for transfer.

Time limits:

The deadline for HMCTS to provide the necessary information to HMRC has been extended to one month. The time limit for HMRC to request additional information from the PRs has also been increased, from 35 days to 60 days.

What does this mean for you?

If there is no inheritance tax to pay (i.e. the estate is small or exempt), and the person dies on or after 1 January 2022, you do not need to report the value of the estate to HMRC as part of your probate application.

If there is inheritance tax to pay (i.e. the estate is not excepted), and the person dies on or after 1 January 2022, you will need to fill in and file an IHT400 and IHT421 with HMRC, and wait 20 working days before you can apply to the registry for probate.

When should you seek legal advice?

While these changes are welcomed, applying for probate and administering an estate can still be a time-consuming and difficult process for bereaved families. Our private solicitors can guide you through the process and provide advice on complex matters where IHT is payable, trusts are in place and/or assets are located overseas. Furthermore, our experts can assist PRs with their duties and advise on the potential risks associated with estate administration such as missing assets.

What is ‘Probate’?

What happens to my affairs after I die?

When you die, someone has to take care of your affairs, pay any outstanding debts and distribute your Estate to those that are entitled to inherit it. This is known as the Probate process. You can choose who you want to do this in your Will by naming them as ‘Executor’. This can be a family member or a professional. You can appoint more than one executor up to four executors.

If you don’t have a Will the person responsible is your next of kin determined by inheritance laws whom we call it as  ‘Administrator’. They have to apply for Letters of Administration to start the Probate process. This is known as an Intestate Estate.

The person responsible for the Probate process whether they are the Executor or Administrator is known as your Personal Representative.

A Grant of Probate (Letters of Administration in the case of an Intestate Estate) is the legal document that is issued by the Probate Registry that gives the Executor or Administrator the entitlement to deal with your affairs and allows them to make all arrangements to finalise the Estate.

It is not always necessary to obtain a Grant of Probate. It depends on whether you owned assets in your sole name that require a Grant of Probate. Some companies or institutions will release assets without requiring a Grant of Probate.

We list below the assets that probably need a Grant of Probate to deal with:

  • A property owned in the sole name of the person who has died or owned with another person as ‘tenants in common’.
  • Bank accounts or savings accounts worth over £5,000
  • Stocks or shares worth over £5,000
  • Life assurance policies
  • Private pensions

One of the first things that your Personal Representative will need to do is to value everything in your Estate. This includes everything of value that you own when you die including your car or personal possessions. We call the total value of assets you own as ‘Estate Assets’.

Then, your Personal Representative will need to see if there is any ‘Estate Debts’ that should be paid out of your Estate. The first thing is to calculate if any Inheritance Tax is due and how much. They will then be responsible for reporting this to HM Revenue & Customs (HMRC) and settling the inheritance tax bill from the Estate. Your Personal Representative will also need to subtract any debts, bills and funeral expenses from the total value of your Estate. Any Lifetime Gifts that you have made in the last 7 years will also need to be taken into account and added back in.

You can choose to appoint JY Partners Solicitors as professional Executors in your Will or if you choose a family member or friend as Executor, we can help them with any stage of the Probate process, either taking on the whole process on their behalf, or just part of it.

Contact our Private Client Solicitors

If you have any enquiries in relation to probate or administration of estate, please contact us on 020 8240 9018 or via the enquiry form on our website to discuss.