Transcript THE HOME OF THE PROFESSIONAL ADVISER NAME OF PRESENTATION

James Smith ACII FPFS IMC
Key Account Development Manager
Learning Objectives
•
Understand the process and requirements for dealing with an estate following
death
•
Understand the impact of Inheritance Tax on an estate and what forms need to be
completed
•
Understand associated financial planning issues following death
Aim
•
Trusted & valued adviser to the family & respected by professional connections
Ground Rules
• We don’t cover Intestacy / Laws of Succession in any detail
• For Scotland read “Confirmation” for Grant of Probate
• For Scottish Estates get familiar with Prior Rights, Legal Rights,
Moveable Estate, Heritable Estate & Bonds of Caution
• There is more! This is just a part of a 2.5hrs session. You will be
asked at the end if the full workshop session would be of interest.
Money Advice Service (MAS)
How much do probate services cost?
•
Hourly rate
•
Flat fee - % of estate value
•
VAT
•
Probate fees on top
https://www.moneyadviceservice.org.uk/en/articles/when-should-you-use-a-probate-specialist
• Lots of helpful info on the
Sesame & Bankhall
websites under Legal
Services
• When should a probate
specialist be used?
https://www.moneyadviceservice.org.uk/en/articles/when
-should-you-use-a-probate-specialist
Dealing with an estate following death
Overview - initial thoughts
What are their key
responsibilities and
what is the process
that needs to be
followed?
Who actually
deals with the
estate?
What
documentation
do they need to
provide to
HMRC?
Who deals with the estate?
•
PERSONAL REPRESENTATIVES
•
The Personal representatives (PRs) are responsible for settling the financial
affairs of the deceased.
•
England NI & Wales:
•
If there is a valid will the Personal Representatives are referred to as the
Executors
•
If there is no valid will they are referred to as the administrators
•
Scotland:
•
Referred to as Executor Nominate if there is a will or an Executor Dative if Sheriff
Court appoints them
Executors
•
Executors are named under the will.
•
Power reserved form
Grant of representation – the process
Most cases follow the same basic process;
If there’s a
will - this
normally
states who
sorts out
the estate;
if there’s
no will the
next of kin
can apply.
Application to
get a ‘grant of
representation’
* - this gives
the legal right
to access
assets such as
the person’s
bank account.
Pay Inheritance
Tax - this is only
paid if the
taxable estate
is worth over
£325,000 and is
part of applying
for a grant of
representation once any tax
due has been
paid, the assets
can be
collected.
Collect
the
assets –
e.g.
money
from the
sale of
the
person’s
property.
* If an executor under a will - “grant of probate”.
If an administrator – “grant of letters of administration”
https://www.gov.uk/wills-probate-inheritance
Pay any
debts –
e.g.
unpaid
utilities
bills.
Distribute the
estate - this
means giving
any property,
money or
possessions to
the people
entitled to it
(‘beneficiaries’).
Grant of Probate
•
A grant is not normally required if the estate either:
- passes to the surviving spouse/civil partner because it was held in joint names –
e.g. a savings account
- does not include land, property or shares
•
The executors should contact the organisation holding the money – e.g. the bank or
building society.
•
They may ask for proof of death – e.g. the death certificate after the death has been
registered
•
Each financial institution has its own rules – it may still be necessary to apply for a grant for
funds to be released – most organisations will have a de-minimis/small estates limit.
•
http://www.shareview.co.uk/4/Info/Portfolio/Default/en/Home/Shareholders/Pages
/ManageEstate.aspx
Grant of Probate Application
The probate application
form PA1 (Form C1 in
Scotland)
Probate appointment form
ARF1 in NI
An official copy of the death
certificate
The application fee of £105 a cheque made payable to
HM Courts & Tribunals
Service (there’s no fee if the
estate is under £5,000)
Variable fees up to £250 in
NI & Scotland
The Inheritance Tax form
205 - if an excepted estate*
(C5 in Scotland)
The original will and 3
copies - and any codicils
(additions or amendments
to it)
Extra copies of the grant
can be obtained (£1 -£10
each) - this means they can
be sent to different
organisations at the same
time
Tips & Recommendations
• Ensure you obtain multiple copies of the death certificate and
grant of probate – most organisations will require an original
certified copy!
• Retain a copy of the will as the original will not be returned by the
probate office
Inheritance Tax Forms
• “Excepted estates”
• Where a full Inheritance Tax account is not required then IHT205
(2006) – Return of Estate Information is completed
• Permanent resident of England, Wales or Northern Ireland
• This form is sent to the Probate office with PA1
• C5 (2006) is completed where the person’s permanent home was in
Scotland
Excepted Estates
One of the following must apply if
death is after 1/9/2006:
Additionally, for deaths on or after
6/4/2010 if both the following apply:
Grant of Probate - Process
• The probate office will send the executors/personal representatives an
oath. They will need to swear the oath at either:
• the office of a commissioner for oaths (usually a solicitor)
• a local probate office – England & NI
• The local Sheriffs Court in Scotland
• The oath is a promise that the information given is true to the best of their
knowledge.
• The grant should come through the post within 10 working days of
swearing the oath.
What IHT documentation does HMRC
require if it is a non excepted estate?
A full account is required
•
An IHT400
(plus
schedules) is
required when
there is
Inheritance
Tax to pay or
the
deceased’s
estate does
not qualify as
an “excepted
estate”
IHT 421
• Two page summary for probate purposes.
• Outlines those assets in the deceased's estate that will become the
property of the personal representatives to distribute among the
beneficiaries.
• It is sent to HMRC Trusts and Estates Inheritance Tax together with the
IHT 400 form.
Question
• How does the probate registry know that an IHT submission has been
made and any tax paid?
Tips & Recommendations
1) Get clients to maintain an accurate list of assets held –
amounts, who with etc..
2) Ensure a list of gifts is made – remember a PET failing within
the last 7 years will require you to look back at CLTs in the prior
7 years (the 14 year rule)!
3) Utilise IHT 403 as a pro-forma to record gifts made
IHT 403
Pension fund schedule – IHT409
• The pension
fund needs
to be paid at
the
discretion of
the trustees
for it to be
free of IHT.
Tips & Recommendations
• Discuss general advantages of a spousal by pass individual trust
for any lump sum pension death benefits versus an expression of
wish
• Review Section 32 & Retirement Annuity (S226) policies – are
they under trust?
Pension fund
So as long as the pension benefits are paid at the discretion of the
trustees they are never included in the estate for IHT purposes ….or
are they?
Be aware of
page 2 of
IHT409!
Caution when considering a transfer of and changes to pension benefits where
the member is in serious ill health and IHT is an issue!
The value of pension benefits could be included in the estate for IHT purposes –
even if the trustees are using their discretionary powers!
Who pays any Inheritance Tax due?
•
Usually, the personal representative pays Inheritance Tax on any assets in the
deceased’s estate that are not held in trust.
•
The money generally comes from the deceased person’s estate. However,
because the tax must be paid within six months of the death and before the grant
of probate can be issued (or grant of confirmation in Scotland), sometimes the
executor has to borrow the money or pay it from their own funds.
•
In these cases, the executor or the people who have advanced the money can be
reimbursed from the estate before it's distributed among the beneficiaries
Finding the money to pay any Inheritance
Tax due?
• Ways to fund an Inheritance Tax payment before probate, include using
the deceased’s bank account, Government Stock or National Savings.
• Assets under trust (Probate Trust?)
• Conversation with HMRC?
Once the Grant has been issued – next steps
Contact
organisations/obtain
assets
The executors should send
a copy of the grant to the
relevant organisations
(e.g. bank/ISA
provider/share registrar)
They should then release
the assets so they can be
transferred into the
executorship account
Pay any debts or
outstanding payments
This could include
outstanding bills and
any tax owed
The executors have a
legal responsibility to
pay off any debts or
outstanding payments
before distributing the
estate
Distribute the estate
As per the will
Or if a will had not
existed under the laws
of intestacy
Accounts should be
prepared, approved and
signed by the executors
and main beneficiaries
Dealing with debts on death
• Any Inheritance Tax due will have to be paid before probate or
confirmation is granted.
• Once received grant of probate/confirmation, need to use the money in
the estate to pay off any outstanding debts.
• This needs to be done before the estate can be distributed to
beneficiaries.
• If there isn’t enough liquid money, this can mean having to sell assets,
including property.
• Value of the estate less than all the debts owed by the deceased =
‘insolvent estate'.
- priority order…………………..
Dealing with debts on death
1. Secured debts such as mortgage and secured personal loans.
2. Reasonable funeral costs and the costs of administering the estate.
3. Unsecured debts, such as credit cards, unsecured personal loans, gas,
water and telephone bills, unpaid rent, Council Tax and other taxes, and
repayment of overpaid benefits.
•
If there isn’t enough money to pay everyone, the personal
representative should take advice from a probate specialist on which
debts should take priority, and they should inform the creditors that the
estate is insolvent.
•
https://www.moneyadviceservice.org.uk/en/articles/dealing-with-the-debts-ofsomeone-who-has-died
Tips & Recommendations
• Place an advertisement in the local paper asking for creditors to
come forward
Summary
• Ensure you are the trusted and valued adviser to the family
• Assist clients recording of assets held and gifts made (IHT403)
– reviews?
• Professional connections – talk the same language
Question one
• Would you be interested in attending the
full case study master class?
1.Yes
2.No
Question two
• Which particular financial planning aspects
of dealing with an estate are of interest?
1.Packaged IHT solutions
2.Pensions & trust planning
3.Holistic platform solutions
4.All of the above
Important information
Information about tax is based on AXA Wealth’s interpretation of current legislation and HM Revenue &
Customs' practice. Tax treatment can change and depends on your client’s personal circumstances.
The information contained in this presentation does not constitute advice. It is designed for financial
adviser use only and is not intended for use with individual investors. Any sample screen shots
displayed are correct at date of issue but may be subject to change.
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