Applying for Probate can be a complicated process, as anyone who has served as an Executor can tell you.
Whether you plan to go-it alone, or seek professional assistance along the way, here is our “Top 5” list of common probate mistakes, and tips to avoid them.
Mistake One: Underestimating How Long Probate Will Take.
Probate appears easy in concept, but even simple estates can get bogged down, and medium-to large-size estates can be subject to numerous time-eating requirements. That is before Executors are hit with any unexpected 1975 claims!
Underestimating the amount of time and work that is involved can also lead to other mistakes.
The first own goal is caused by telling beneficiaries “it shouldn’t take that long”. If you have ever waited for a cheque in the post, you will know it’s easy to get anxious, or cross. Now multiply that emotional reaction by the number of beneficiaries who are worried they should have had their cheques already.
Secondly, if by chasing a self-imposed deadline, you push through the process too quickly, errors made in haste will cause still further delays, increase administration expenses and multiply your stress as Executor – not least because you may be personally liable.
You should accept that this will be a marathon, not a sprint. Sure, you will hear about estates that were tied-up in three months flat for the cost of just a few postage stamps. Ignore these stories as each estate is unique as are the issues that must be dealt with.
Instead of worrying, take the time to do the job properly, and you will sleep better at night – both throughout the process, and even more importantly, long after it’s finally over.
Mistake Two: Failure to Properly Interpret a Will
At its simplest, a Will is a legal document that expresses the wishes of the deceased.
But legal documents are rarely simple, and Wills are no exception. Wills are drafted to comply with extensive and arcane statutory and common law parameters. Wills contain technical legal jargon used to comply with these requirements as standard.
Often that technical legal usage does not comport with everyday English usage. There may be important legal meanings hidden in what appears to be straightforward language (“to be held in trust” for example), with important implications for what Executors must or must not do.
Add to this any specific but convoluted wishes by a testator, or worse, a poorly drafted Will that has as-yet undiscovered ambiguities or mistakes awaiting the unwary Executor, and you have the makings of an interpretation minefield.
Unfortunately, mistakes made interpreting a Will may not come to light until a disappointed beneficiary seeks professional legal advice – and then files a claim. And if estates funds have already been distributed to other beneficiaries, you may have a cost and liability disaster on your hands.
Given the risks for costs, time and liability, Executors are well advised to seek clarification from a professional for even seemingly straightforward Wills and the estate administration that follows.
Mistake Three: Incomplete Assessment of the Estate
The Executor has responsibility for the entire estate, inclusive of all assets and liabilities.
Toting-up the value of the assets can be a challenge in itself and tracking down every liability and settling all the debts can be even more complicated.
The result of those efforts may be that the beneficiaries receive less than they might have hoped for, but as an Executor you must ensure that any difference does not come out of your own pocket.
Once an estate’s assets have been distributed, creditors may pursue the beneficiaries for payment. Beneficiaries in turn may take legal action against the Executor – or the creditor may take legal action against the Executor directly.
As any solicitor will tell you, providing reassurance in case of failure to uncover estate liabilities, despite best efforts or otherwise, is what professional indemnity insurance is made for.
If Executors are unsure of what liabilities the deceased had, or are unsure how to find them, professional support can help wrap-up an estate without fear of potentially lingering liabilities.
Mistake Four: Distributing Funds too Early
Beneficiaries may have as little patience for the myriad reasons for delays as they have understanding of those reasons. Indeed, beneficiaries putting pressure upon Executors to distribute available funds early is all but guaranteed.
Distributing assets early can be tempting, as a useful way to relieve pressure on the Executors who know they may be many months from winding up an estate that beneficiaries thought should have been sorted months ago. It can be a good idea to make partial distributions when there are plenty of funds to go around. However, premature distributions may be the cause of significant problems.
Making small or frequent early distributions to beneficiaries may complicate matters for Executors, who have a legal duty to keep accurate, up-to-date accounts, and to keep evidence of all receipts and payments.
It may also create confusion among beneficiaries, who in turn end up creating extra work before they have approved the final accounts and could complicate the payment of liabilities that unexpectedly exceed funds left on account.
The good news is, Executors are under no duty to keep beneficiaries happy during administration. Indeed, as Executors can be held liable in a personal capacity if they make mistakes that cost the beneficiaries, as Executor you have every incentive to get it right the first time.
That could mean holding the line against requests for early distributions. Professional intervention can help take this pressure off the Executors’ shoulders, as a professional will not be personally concerned about turning down a beneficiary’s requests.
Mistake Five: Incorrect Filing of Probate and Inheritance Tax Forms
Online Inheritance Tax reporting and widely available DIY probate guides make it easier than ever before for Executors to file for probate.But “ease of use” does not necessarily mean easy to do correctly or within legal parameters.
Incorrect tax filing remains among the most common mistakes Executors make when applying for probate. To be fair, this is also typically the most difficult part of the process, especially if the estate is complex.
Aside from knowing which forms require filing, and how to complete them when you do, it is of critical importance to be able to provide proper evidence for how you valued the estate. Inheritance Tax is a significant money-spinner for the government, so be assured that HMRC will be paying very close attention to your figures. Getting it wrong can have serious consequences for Executors who may face civil or even criminal liability.
With beneficiaries on one side and HMRC on the other, there are various ways to get things wrong. Failing to apply for all the estate’s eligible exemptions may make HMRC happy, but you’ll quickly find your beneficiaries seeking legal counsel. By contrast, pay too little to HMRC, and unhappy beneficiaries will be the least of your problems.
Much like underestimating the time requirements of probate, underestimating the complexity of estate filings can leave Executors running out of time, with the result being that interest – and perhaps even penalties – are incurred. Equally, rushing to complete the filing can lead to further mistakes and penalties.
Bonus Mistake: Failing to Seek Professional Advice
Whilst these ‘top five’ mistakes are common, there are many more pitfalls that await the inexperienced Executor, from failure to keep organised documentation, to intermingling of estate funds with personal funds. And shadowing every decision you make as Executor is the spectre of personal legal and financial liability — even if the errors are genuine mistakes.
But whatever the mistake, you will have noticed that the common thread through all of them a failure to secure reliable professional assistance in a timely way. And it is the easiest mistake to avoid!
Local families have trusted rhw Solicitors with probate matters for more than 180 years, and it’s a tradition of trust and reliability that we’re proud to continue.
Jack Haskew – rhw Solicitors llp
If you are an Executor then please call rhw’s friendly private client team for a chat, legal advice and support. rhw can also help you if you are unhappy as to how Probate has been handled. Call rhw Solicitors on Guildford 01483 302000 or email us firstname.lastname@example.org