In times past an estate meant everything under the control of a noble, even the village and church buildings. Nowadays it includes the deceased’s personal possessions, money, investments, and everything else they own. Dealing with the affairs of a deceased person involves transferring these to the new owners in accordance with the law.
However, a deceased person also usually leaves debts behind them too. These could range from credit card balances to mortgages, to even open court judgements. These obligations therefore require settlement first, before the residual of the estate may pass to the lawful heirs as follows:
- To surviving heirs in accordance with the deceased’s legal will, OR
- To the surviving partner / relatives per the the rules of intestacy.
This Task Falls to the Executor or Administrator
The UK government officially appoints the person responsible for settling the debts of a deceased estate, and sharing out the remainder. The person so dealing with the affairs of a deceased person will be one of these:
- The executor named in the will as responsible for dealing with the estate.
- An administrator if none is named. This is usually a close relative or friend.
But in both instances, the administrator or executor must first apply to UK government for permission to proceed. The government will indicate approval by issuing either letters of administration, or a grant of probate respectively.
Dealing With the Affairs of a Deceased Person
However, the executor or administrator does not have complete freedom to act as they wish. Therefore, they are well-advised to follow these guidelines in this broad process:
Trace the Financial Assets
- First, track down all the deceased’s financial documentation you can find.
- Then, send a death certificate copy to all the organizations holding their money.
- Request a detailed breakdown including income, ask them to freeze the account.
- Open a bank account in the name of the estate. Only use it for that purpose.
Determine the Financial Obligations
The next step when dealing with the affairs of a deceased person involves establishing all their financial obligations. These typically include moneys they owed to other people at the moment they died, and maintenance and support other people rely on.
The law requires that administrators advertise the estate in The Gazette official publication, and advisedly a second local publication too. This notice allows creditors two months plus one day to lodge claims against the estate.
The executor / administrator is now in a position to draw up a balance sheet of the deceased person’s assets and liabilities. However, they have still one more debt to consider, inheritance tax due to HM Revenue and Customs.
The standard inheritance tax rate is 40%. However, this is not due if one of the following two situations apply:
- The net worth of the deceased estate is less than the current £325,000 threshold as determined by the balance sheet.
- A spouse, civil partner, charity or community amateur sports club inherits the amount over that threshold between them.
However, that value becomes £500,000 if the deceased previously gave their home to their children, adopted, foster or stepchildren, or grandchildren.
Make Arrangements to Pay Inheritance Tax
This is an extensive topic and we touch on the basics here. An executor or administrator dealing with the affairs of a deceased person must settle the debts of the estate before they distribute the assets to the heirs, and this includes inheritance tax. Here is an overview:
- Inheritance tax must be settled, or arrangements made to pay within 6 months of death.
- HM Revenue and Customs plays hardball and starts adding interest after that deadline.
- This money may be paid from the deceased’s, executor’s / administrator’s funds, or a combination thereof.
- In the latter two instances the executor or administrator becomes a priority creditor of the estate.
Dealing With Affairs of a Deceased Person – Debts
The custodian of the estate – whether administrator or executor – may now proceed to settle all other financial obligations. But first, they must ensure two months plus one day have passed since they placed an advertisement in The Gazette official publication. Any value left over becomes the residual of the estate and the entitlement of the lawful heirs.
Dealing With Affairs of a Deceased Person – Heirs
The lawful heirs of a deceased estate are fully defined as follows and there are no exceptions:
- According to the precise stipulations laid down in their final, legal last will and testament, OR
- If there is no will, by laws of succession, being their legal spouse followed by their closest relatives.
The final task of the executor is to share the residual of the estate according to the above priorities. They have the right to cash in any and all of the assets to achieve a fair and just distribution.
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