Although it’s great news that the Probate Registry has recruited some 50 new case handlers to help deal with the delays, it will take time for the new personnel to work through the backlog of probate applications in the system. Hopefully, service levels will improve quickly but the current delays will still impact on legacy administration, as follows:
Executors are often the next of kin or closest friend of the deceased and may be emotional throughout the administrative process. Any delay may exacerbate their grief and could result in them shying away from their duties. Stay in contact with them and offer support. Should their role become overwhelming then suggest they instruct a solicitor to act on their behalf, enabling them to carry out their role with professional support.
Inheritance tax must be paid to HMRC within six months of a person’s death. If the tax isn’t paid by then, then interest becomes payable at a daily rate! This is particularly relevant if the estate has a property, but limited cash assets. If there are insufficient funds to pay the tax at the outset, it can be paid by instalments, however, do note that interest will be charged on the outstanding sum until the sale of the property has completed and the tax is paid. The interest paid will reduce the value of the estate funds for distribution.
Capital gains tax
If there are shares, investments or property within the estate and they have increased in value since the person died, or since being valued for inheritance tax purposes, the executors may need to pay capital gains tax (CGT) on the gain. Executors may only use an annual exemption amount if the assets are sold before the end of two years following the end of the tax year in which the person died. After this, no exemption applies. CGT is currently 28% for residential properties and 20% for all other chargeable assets and so any delay in arranging their sale could result in a higher tax liability!
As increasing interest rates begin to take hold, property sales may slow and prices may fall. A property cannot be sold until probate is granted and therefore sales may be delayed for months, resulting in loss to the estate.
Executors must arrange for any property to be insured until it is sold. Unoccupied property insurance becomes more difficult and expensive to arrange the longer a property remains empty, which also adds costs to the estate.
If there is a drop in value between the probate valuation and the sale price, any inheritance tax paid on the higher value will need to be reclaimed from HMRC, who then provide the executors with a certificate to confirm that inheritance tax matters are concluded. This slows down the administration and will add to its costs.
Varying the terms of the deceased’s estate
There are many reasons why a beneficiary may wish to redirect all or part of their gift to another person. This is done by a deed of variation. This can be done at any time but, if it is to save tax, it must be completed within two years of the date of death. Executors will need to liaise with beneficiaries to ensure any such changes are made within the required timescale!
The good news! Did you know that, if a cash gift has not been paid out within 12 months, interest must be paid on a daily basis until the gift is paid? The rate of interest is currently 1.313% (since Sept 2022). This may be a low rate, but it’s definitely worth claiming!
How can charities help during the delays?
During delays, take time to support the executors. If they are solicitors, then they may be willing to offer corporate support or will-writing services to you. If they are friends or family members of the deceased, they may choose to support your charity too!
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