When a person dies, someone has to take responsibility for dealing with their property, debts and distributing the estate.
The person dealing with the estate administration will normally be required to provide proof that he has the legal authority to deal with the deceased’s affairs, in order to close bank accounts, sell shares and otherwise deal with the deceased’s assets. A grant of representation (usually a grant of probate or letters of administration) is proof of that authority.
However, there are circumstances when the assets can be collected without a grant.
Money held in a joint bank account will pass automatically to the surviving account holder, when one of them dies. The bank will arrange the transfer on sight of the death certificate and no grant of representation is required. The same applies to shares held in joint names.
Where the joint property is a house, you need to check the type of joint ownership.
- If the house is held as ‘joint tenants’, the surviving joint owner will automatically inherit the deceased’s share.
- If the house is owned as ‘tenants in common’, the deceased’s share will form part of his estate and as such will pass in accordance with his Will or the intestacy rules. A grant of representation may be required but not in all situations.
Low Value Estates
Where the estate consists only of small amounts of cash in bank or building society accounts (typically less than £5,000) plus some personal possessions, a grant of representation may not be needed. Banks will often release small balances to the executor (or if there is no Will, to the next of kin) without a grant, but the claimant will be required to give an indemnity. The maximum amount which will be released under such ‘small estates’ procedures varies from organisation to organisation, as each has its own requirements.
Life Policies/Pension Death Benefits
Some life policies (e.g. those written on trust) can be paid out without a grant of representation. The deceased may have nominated a beneficiary to receive pension death benefits.
Where the estate assets are not sufficient to pay debts and expenses, a grant will not be needed (unless a personal representative is required so as to pursue a legal claim on behalf of the estate).
The deceased may have been a beneficiary under a trust. The trustees will be able to distribute the trust assets, in accordance with the terms of the trust, without a grant of representation.
A grant of representation is likely to be needed if the estate includes any of the following assets:
- Land (freehold or leasehold) held in the deceased’s sole name
- Bank accounts containing more than £5,000
- Stocks and shares in the deceased’s sole name
- Life policies
- A legal claim, which the personal representatives intend to pursue on behalf of the estate
The need to apply for a grant should not be confused with the duty to submit an inheritance tax return, as HMRC has its own rules as to when an inheritance tax return is not required. An estate may still be liable to inheritance tax even if a grant was not needed to collect the assets.
If a loved one has died and you are unsure whether a grant is needed, please contact any member of our Tax, Trusts and Estates team for an initial no-obligation chat:
Edward Pennington, Clive Barnard or Caroline Sturge.
For more information on this matter or any other private client matter contact rhw’s team.