What are Personal Representatives
When someone makes a Will they appoint Executors who have the job of ensuring that when that person dies they wind up their affairs in accordance with their wishes and within the law. Executors are the personal representatives of a deceased person.
When a person dies without making a Will (intestate) the law dictates who may be appointed as an Administrator to wind up the deceased’s affairs and distribute any money according to the rules on intestacy. The rules follow common sense and allow for the next of kin to be appointed; first the spouse, then children, parents, brothers and sisters and remoter relatives. Administrators are also known as personal representatives.
Problems can occur when the personal representatives are unable to act, i.e. because they are dead or no longer have mental capacity. In such circumstances we at Edwards Duthie have many years experience in applying to Court for alternative personal representatives to be appointed or to remove personal representatives who are unable to complete the tasks.
Sometimes an estate will need to be held “on trust” for people such as children until they are old enough to take their gift. We can advise Personal Representatives on this long term role and their continuing duties.
What does the job involve?
“Going to Probate” is a daunting prospect for most people. It is surprising how much paperwork someone can accumulate in a lifetime and how much more is generated in dealing with it.
Broadly speaking the Personal Representatives will have to deal with practical matters such as cleaning the house, arranging the funeral and informing relatives. Once this is done the Personal Representatives will have to assess the deceased’s financial circumstances and make sure all assets are protected and insured where appropriate.
After the Personal Representatives have built up a picture of the value of the deceased’s net assets the Personal Representatives must determine whether any Inheritance Tax (also known as “death duty”) is due on the estate and pay it. This will allow for a Grant of Probate (Will) or Letters of Administration (intestacy) to issue. The Grant proves the right of the person named on it to deal with the deceased’s assets and is accepted by all institutions. The Personal Representatives can then start to close or transfer or sell all the deceased’s assets.
Personal Representatives will need to keep a clear account of everything they receive and pay out since the beneficiaries can at any time require an Estate Account to be filed in the Court. If assets are lost or fail to produce income the Personal Representatives could be held responsible. Furthermore beneficiaries will expect Personal Representatives to pay them interest if they do not receive their entitlement within a year. Personal Representatives will not be able to charge for their time spent and must fit in the job around the rest of their lives.
It is hardly surprising that many Personal Representatives prefer to appoint professionals to act for them. If you instruct Edwards Duthie to assist you we can help as little or as much as you want. Many families have appointed us at their Personal Representatives for generations, secure in the knowledge that qualified experts will be working quickly and efficiently to conclude the administration of their affairs. We offer a full range of services from the “legwork” of getting houses and furniture valued to the specialised areas of tax calculation and trust administration. It is easy for us to work in partnership with Personal Representatives dividing the tasks as you wish to increase efficiency and keep down costs.
Taxation
Personal Representatives must keep a sharp eye on the tax affairs of an estate and of the deceased. After someone has died if they were a tax payer it is probable that their income tax will need to be reassessed and repayments claimed.
After death a person’s assets change their tax character. Investments that were not taxable, ie, PEPs/ISAs now are. Individuals have a personal tax allowance for income tax but a deceased does not. The Personal Representatives must ensure all income received during an administration is taxed at the appropriate rate and if necessary file tax returns.
Capital Gains Tax is charged on the difference between the cost of an asset and its sale price. An individual’s house is exempt from this tax but a deceased’s house is not. In these days of rising house prices it is common for a property to increase in value between the date of death and the date of sale and Personal Representatives must account to the Revenue for the tax. If they do not they can be held personally liable for the tax.
Inheritance Tax is the main concern for most Personal Representatives. Especially so since house price inflation has placed many families with moderate means into the tax bracket. Where the total value of the deceased’s assets exceeds £325,000 (2009-2010) a married couple have a joint limit of £650,000. Anything over this amount is taxed at 40%. Personal Representatives will have to make the decision about which assets to use to pay the tax, try to ensure there are no penalties or interest and often enter negotiations with the Revenue about how some assets have been valued. Personal Representatives remain personally liable for the tax (even though they may get nothing from the estate) until the Revenue officially gives them clearance.
Variations
It is possible for beneficiaries to vary the provisions of a deceased’s Will or intestacy to make it more tax efficient or to alter the entitlement to the estate. This must be done within two years of the date of death. A prudent Personal Representative should make sure they know if tax could be reduced in some way and advise the beneficiaries accordingly. The Personal Representatives will be expected to prepare the appropriate documentation and submit it to the Revenue.
Edwards Duthie can give specialist tax advice on all areas concerning estate administration. We prepare and submit tax returns and Inheritance Tax accounts routinely. We can liaise with the Revenue for you and provide expert opinions on possible tax consequences of a variety of courses of action always with an eye to reducing tax and relieving Personal Representatives of liability as quickly as possible. If you appoint us to assist you then you can relax confident that the tax affairs will be wound up without further worry.
Problems in Administrations
With the best will in the world it is not always possible for Personal Representatives to do their job straightforwardly. The most obvious problems occur in intestacies. Personal Representatives may know there are beneficiaries to an estate but may not be able to find them. With the estates of very elderly people there can often be no surviving relatives in the immediate family and obscure cousins have to be tracked down before the estate can be distributed.
Sometimes families are involved in disagreements perhaps a family member will not leave the family home or has control of deeds or documents required for the administration. Some family members object to the Will of a deceased and seek to frustrate it or challenge it.
Alternatively it might be the Personal Representatives who are not taking the appropriate action to administer the estate. Sometimes Personal Representatives are unable or unwilling to take the right course of action and fail to take account of beneficiaries’ wishes causing losses to the estate.
It often helps to have a professional who can explain the law and help to define the position of the Personal Representatives and beneficiaries. Where relations are not good then a disinterested third party can act as a mediator between rival claims and promote settlement in the best interests of the estate. At Edwards Duthie we can advise on how to protect the estate and if necessary issue proceedings to defend the estate or the Personal Representatives. We have experience in tracing beneficiaries around the world and can advise what action to take when searches prove fruitless. If you appoint us you can be certain that disputes will be minimised and resolved ensuring that the estate remains protected for those who are entitled to it.
What are the costs?
If you instruct us to administer your whole estate, then there is no fixed charge for this but we will charge you for the time spent working on your file at our hourly rates.
A typical administration will incur between £2,000 to £5,000 in time charges.
Other probate providers typically charge around 3% or 4% of the gross estate. If the gross estate is worth £280,000, then their fees work out at about £10,000.
Many banks and building societies offer a probate service. They charge a fixed fee based on the value of the estate which generally work out at around £11,000 for an estate worth £280,000.
Solicitors are often criticised for being expensive but compared to our rival organisations, we offer very competitive rates.
