7 key steps involved in estate administration

Dealing with the administration of a deceased person’s estate involves a number of tasks. In this post we look at the 7 key steps involved in estate administration and the best way to approach them.

An executor or administrator, is responsible for winding up a deceased person’s affairs. Some find that they do not have enough time to devote to this task, as it can be very time-consuming. One option is to enlist the help of a probate solicitor to do the job for you.

The 7 key steps of estate administration are as follows:

1.     Valuing the estate and securing the deceased’s assets

Firstly, the estate must be valued as accurately as possible. This requires taking into account all of the deceased’s assets, including property, cars, savings, investments and valuable items. For example, such things as furniture and cars.

Debts such as mortgages and credit cards debts also need to be valued. Once you have a figure for all of the debts, this should be deducted from the total of the assets to arrive at a value for the net estate. This allows you to calculate whether Inheritance Tax is payable on the estate.

You also need to take steps to protect the estate’s assets, for example, by making sure that property and cars are adequately insured.

2.     Calculating and paying Inheritance Tax

Calculating and paying Inheritance Tax comes next. This is not always straightforward as there are several allowances available. Part of the tax may be payable on a sliding scale if the deceased made sizeable gifts during the last seven years of their life.

The basic threshold over which the tax is payable is £325,000. It is generally payable at the rate of 40% on the portion of the estate over this threshold. If the deceased’s spouse has already died and their estate did not use all of their Inheritance Tax allowance, this can be added to the deceased’s allowance.

A property allowance also exists if a property is left to direct descendants. This is £175,000 for each spouse and again, this is transferrable between spouses if not used.

You will need to ask HM Revenue & Customs for an Inheritance Tax reference number and then pay the tax to them.

3.     Applying for a Grant of Probate or a Grant of Letters of Administration

Unless the deceased’s estate is small, you will need to apply for a Grant of Probate. This is the document that gives the executors the legal authority to wind up the estate. If the deceased did not leave a Will, then the person who will take on the estate administration should apply for a Grant of Letters of Administration, which has the same function.

4.     Collecting in the assets and clearing the estate’s debts

Once the Probate Registry issues the grant, copies can be sent to all of the asset holders so that accounts can be closed and money paid to the estate. All debts should be cleared. If there is a chance that some debtors have not been identified, you should place an advertisement for them in the local paper and in The Gazette.

5.     Identifying beneficiaries

Similarly, you can advertise for beneficiaries to come forward if there is a risk that you have not located all of them. It is important to protect your position as far as possible, as the executors or administrators of an estate will be personally liable for any mistakes they make that cause a loss to the estate.

6.     Preparing detailed estate accounts

Once the debts have been cleared and assets collected, to include selling property if necessary, estate accounts should be prepared. These need to include full details of all transactions, including income received during the estate administration period. See our post on ‘What should be included in estate accounts?’

Residuary beneficiaries are entitled to see the estate accounts. These are the beneficiaries who are left the residue of the estate once all of the specific bequests have been made.

7.     Distributing the estate and obtaining receipts

The estate can then be distributed in accordance with the deceased’s Will. If they did not leave a Will, then it will be in accordance with the Rules of Intestacy. It is important to obtain signed receipts confirming that the beneficiaries have received what is owed to them.

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