Friday, 9 January 2015

Doing Your Own Probate?

Thinking of Doing your Own Probate? 
Pictured are my DIY Probate files with 12 months of paperwork

This post was written in January 2015

A year ago this week my mother died aged 80. Today we sold the house our family (my brother, sister and me) all grew up in. Our family lived there for 50 years. This was the final step in winding up my much missed mother's estate.

You're probably reading this because you're and executor and you're in the process of or thinking about applying for probate or you're in the middle of the admin jungle.

I'd never been named as an executor before. My brother and I decided to apply for probate on behalf of all 3 of us. We would share the paperwork. It does mean 2 people have to sign forms, and we live in separate cities so there was a lot of posting things back and forth.

Solicitors can charge around £10,000 for this service. That's an eye-watering sum. 12 months on I can fully appreciate why they charge so much. It is a lot of work.

More and more UK homeowners will fall into the Inheritance Tax net. The individual tax free allowance on death is £325,000. The same allowance carries forward from a previously deceased spouse or civil partner making a total of £650,000 before any IHT is payable. However many family homes now exceed this value. Above this figure IHT is payable at 40% on the balance.

However I can honestly say I think it is worth doing it yourself. But there are a few things you must be aware of:

1. It will take a long time. 12 months is relatively quick to wind up an estate upon which death duty / inheritance tax is payable.

2. You must be organised.

3. It will be much easier if you have internet access, a PC and a printer. You'll also be making a fair amount of phone calls.

4. Some of the tasks will be upsetting. If you can share the burden it really helps. My brother and I managed to have a good laugh when things got really ridiculous. 

There is a lot of information to gather before you can even apply for probate. (These notes assume you are dealing with the last surviving resident of a property. They will be slightly different if the home is still occupied).

First Things First
During the first week after the loss of someone very close, things can be very difficult. Sleeping is hard, thinking straight is a challenge. Don't make any other big life changes! You must register the death (get a few copies of the death certificate). If you can, you should collect up any key documents - the Will (assuming there is one) Deeds to any property, tell the bank and cancel deliveries like newspapers and subscriptions. Remove any valuable items from the unoccupied house.

Notify Utilities and Insurers
The next set of tasks can be very frustrating. Some companies have 'bereavement teams' who are specially trained to help you and provide the information you need. They will help you through the 'data protection' hurdles so you can discuss the deceased account. They will possibly need to see a copy of the death certificate. O2, SSE, and Plusnet scored very highly here, as did the Telegraph and Independent newspapers which my mother subscribed to (They both refunded fees for unused subscriptions). The History Magazine wanted to see a probate certificate to refund £19! You'll need to pay any outstanding bills or collect in credit. You will be able to continue services like gas and electricity as executors. Make sure the home remains insured.

Pension Providers
Pension providers (including the state pension) need to know the date of death and receive a copy of the death certificate. 

Banks and Building Societies
The real frustration starts when you have to contact financial institutions. All the financial institutions I dealt with had different procedures and forms. 

Nat West does have a bereavement 'estates' department, but they were a nightmare. Even they agreed the service fell far short and paid me £100 compensation. They also refused to release any funds (except to reimburse funeral expenses) until probate was obtained.

Santander released a sizeable cash ISA sum on sight of the death certificate. They will release up to £25,000. Halifax still wouldn't tell me how much was in a savings account after 2 long phone calls, and a letter. I had to attend a branch appointment to discover the account held £88 (40% of which was later paid in inheritance tax).

Shares and Investments
The 2 main registrars for all shares are Equiniti and Capita. We found the former much more helpful. Capita were almost obstructive at times. Unless shares are held electronically in the CREST system you'll need to find all the share certificates. There is a charge to replace them and it can be significant.

Fund and Life Assurance providers also vary enormously in their handling of probate enquiries. Invesco Perpetual were excellent, Skandia a nightmare (they would only deal with the financial adviser even after they received the death certificate) Aviva were also difficult to deal with and their answers inconsistent. Sterling released funds immediately (which was very useful to pay the inheritance tax, more on that in a moment) while others insisted probate was obtained before funds were released.

Open an Executors Bank Account
The Nat West were keen for us to open an executors account, but due to their appalling service we went to Santander as I was a customer. Santander don't actually offer formal 'executor' accounts so we opened a current account in joint names and hoped this would work for us. It did. We needed the account to pay the utility bills and collect the funds into.

Property Valuation
You'll need a valuation for any property. We decided to hire a chartered surveyor to do this. It cost a few hundred pounds, but we decided the cost was worth it to ensure HMRC accepted the figures. On the IHT400 form HMRC ask who has provided the valuation so a qualified professional is worth the expense in my view.

Valuing the Contents of the home
This seems a daunting task at first. I looked at some examples of valuations and was shocked to discover how low they were. Then reality set in. The possessions we spend a lifetime of spending on aren't worth much when we're gone. Books, clothes, linens, kitchen stuff and so on have no value. Even all the furniture in the home may be worth very little. We gave all the clothes to charity almost immediately so others could benefit from them. We settled on £1250 as a value for the other things. later, on reflection this figure seemed quite high. The furniture had little value and we sent over half to the British Heart Foundation (who willingly came and collected it). My mother subscribed to Royal Mail First Day Covers. We discovered they were worthless too (have a look on eBay where 100 fetch about thirty quid!).

Applying for Probate
By late March, after 3 months of collecting documents we were ready to fill in the probate forms (IHT 400). I did them in draft, which took several hours, and then my brother and I went through them all again together which took about 6 hours. This was an essential step as we uncovered a couple of significant errors I had made. 

Surprisingly you have to pay any Inheritance Tax due before probate is granted. This is a challenge if you don't have sufficient funds. It is a Catch 22. Some people have to borrow the tax due and then repay the loan when funds are released after probate is granted. I understand why HMRC does this (to stop people failing to pay up) but it seems tough. There is a grace period on any property which makes up the estate over the threshold for IHT. You also have to calculate your own tax (unlike Self Assessment there is no online HMRC facility to do this, it's all done on paper with a calculator). We sent off the forms and paid the tax online. Then waited.

Receiving the Grant of Probate
It took just over 6 weeks for the Grant of Probate to arrive at the beginning of June (six months to the day after the death). I quickly got to work calling in all the investment and bank funds starting with the most valuable. We decided to re-register all the investments and shares in the names of the 3 beneficiaries. We thought this was fairest and it avoided selling everything whatever the state of the investments. (We also wanted to be careful about triggering additional Capital Gains tax if selling investments or property at a profit over the original probate valuations). This was a good decision, but involved a lot of form filling, some of which got sent back as they were wrong, and one batch I sent to my brother for signatures was delayed in the post for a heart-stopping 12 days (I hadn't put sufficient postage on the package, but was furious the Royal Mail just sat on it for 2 weeks) and took a long time.

Tax Return for the Deceased
You'll also discover the executors need to fill in a tax return for the deceased. This makes sense as there may have been income during the last tax year of their life which has not been taxed, or over-taxed (and a refund is due). There may also be a tax return to complete for the Administration Period (between death and Grant of Probate) to cover any additional funds which have not been declared (for example rent received). Collecting all the paperwork together to complete the tax return can easily take a few hours.

The Estate's Funds Arrive
When all the funds were collected in we decided to pay the balance of the Inheritance Tax on the property and transfer the house into the names of the 3 beneficiaries. This means any gain in value at sale can be divided 3 ways for Capital Gains Tax purposes. As executors we then paid the specific bequests to the other beneficiaries of the will, and then divided the majority of the cash.

Selling the Property
We were lucky in that we didn't need the cash from the sale of the property quickly. We were able to spend almost a full year visiting the house we grew up in and carefully deciding what to do with everything. I cherish the time we have spent doing this. I have spoken to others who had to empty a family home quickly and they usually regret it. It took 3 months to sell the property after the first buyer pulled out. Luckily we weren't in a hurry.

Not Forgotten
Dealing with bereavement is different for everyone. There are many stages. I write this at the end of a difficult year. But my mother would have been pleased that all her affairs had been dealt with thoughtfully, promptly and efficiently.  Also I understand everything about the estate. I know that nothing has been missed. That's how she liked things done. During the process I noticed she kept her papers in order and annotated just the same way I keep mine! Then it dawned on me. I keep my papers just as my mother kept hers because for years I have followed her example! I miss her.

(Update March 2017 - there are important new changes to probate starting in the UK in May 2017. Probate fees will be on a sliding scale based on the value of the estate. For estates over £500,000 there is a significant increase. This post was written in January 2015)


Anonymous said...

Excellent article I will retweet it! Thanks

David Ch said...

Just starting the journey and so glad I found this. Thank you for the down-to-earth and straightforward things you've said. It'd be good to add more tips, such as how other banks rate for executor accounts (we're planning to use HSBC), etc.
Very useful point about valuing the home. My mother is still alive and the will is simple "all to spouse" but we still have to do the whole IHT thing (as a sort of dummy-run) to get probate.

TheChiefExecutive said...

David - I'm sorry to hear of your loss, I know just how it feels. Your mother will be very glad of your support.

I hope you find my experience useful. Please do come back and post anything extra you can add about your experience to help others who read this.

In answer to your feedback - I have never banked with HSBC but I have read they can be sticklers for forms and paperwork which may or may not be helpful in this situation. I found Santander very efficient, but they did not offer an executors account, so my brother and I used a regular joint everyday current account which worked fine. I cannot recommend Nat West after my experience with them.

You will already know that the IHT rules are changing in April 2017 with regard to passing on property. There is a graduated relief being introduced. Details here:

cmpbob said...

A very useful piece for our family at this time, it's full of good information and I would like to thank you for posting this. Santander have been very helpful and are now offering an executor account. However we are not having the same experience with getting funds released from the ISA. Is it possible for you to let us know the process you used and where you did this please?
Robert Wilkinson

The chief Executive said...

Robert - I'm sorry for your loss. I telephoned Santander originally and they made a branch appointment (at my local branch, the one I banked with). At the appointment I showed the very helpful manager the death certificate, opened a new joint (with my brother - who was not present) current account and the cash ISA funds held by Santander in my mother's name were paid into this current account. It appears from your remarks that Santander has changed its policies (you say they now offer an executors bank account, which they didn't do in 2014). I was surprised back then how easy it was to get a sizeable sum (up to £25,000) released without probate. It sounds like it was too easy. I'm sure you've done this but I would ask them to explain the rules they are working to now.

Anonymous said...

This has been so helpful to read. I recognise so much of what you say. My brother and I are dealing with our mother’s estate. I have two questions. Did you get an official valuation of possessions or did you do it yourself? Did HMRC accept that? Second Lloyd’s bank closed out mother’s account and refused to open an executor’s account until we have probate. Her estate is made up of some properties which are rented out so various debts going in and some bills going out. So we need an account ASAP. We can’t wait for probate to come through Did you tell Santander what you were going to use the account for? Is it legal to open a current account? Any advice gratefully received. RH

TheChiefExecutive said...

RH - Santander knew the purpose of the current account, and were extremely helpful (although I was already a customer, and still am). I suggest you and your brother make it a joint account if you are both executors. Santander's online banking is good in my experience.

We hired a chartered surveyor to value the 2 properties my mother owned (she had given one to the children, but only 2 years before her death so there was no benefit). We felt the surveyor was £350 well spent. If HMRC challenged the property valuations we had professional advice to support us.

We valued the possessios ourselves. Before you do this have a search online. It appears HMRC do not expect household goods to be worth very much at all - we settled on £1250 - and we gave much of the furniture to the British Heart Foundation (they will do house clearances too - but they charge for this).

We've just had to wind up my partner's mum's estate. There was no property and no probate - but Royal Bank of Scotland (Nat West) were completely useless and locked her bank account when there was money owing to it from half a dozen retailers (it was a few days before Christmas when she died). The bank said we should coontact the retailers and get them to send the refunds to us. We did this and then the bank processed the refunds anyway. I did get them to pay £250 compensation for misleading us.

Having just been through this again recently with my partner's mother's estate I was surprised how many companies are still very poor at dealing with estates. BT were incompetent, Sky was excellent. The National Lottery (Camelot) were so bad we're about to take a compaint to the Gambling Commission. I'll be writing about that soon.

Unknown said...

Interesting article. My eldest brother recently passed away. We had spoken once in 30 years but he left my contact details with the care home before he died. I felt it my duty to pay for his funeral as he had a very small estate of a few thousand pounds probably. His bank, Nat West, refused to reimburse me part of the funeral expense or disclose what was in his account but I estimate it was only approximately £1000 or so. He left no will or power of attorney so I am trying to sort out his affairs but have the local council now chasing me for his rent whilst he was in hospital and in care before he died. I’m just trying to help but it has become a financial strain as I am also retired.

TheChiefExecutive said...

Unknown 18th December 2018. I’m sorry to hear about your situation. It sounds as if you would benefit from some additional help. Your late brother’s debts do not become yours. There may also be help available for the funeral costs - even if they have already been paid. This is a link to a AgeUK information site. You could also approach the Citizen’s Advice Bureau. This is a difficult process and it is always easier if shared.