Over 50s are wasting £7,200
Why waste thousands of pounds on a solicitor when it's possible to handle the probate process yourself? Or is it trickier than it looks?
Older people are wasting millions of pounds a year on their probate and will decisions, according to new research by Saga.
The firm has looked into the way that we decide how to handle probate – administering the estate of the deceased – and has found that many of us make an expensive mistake by failing to shop around for professional assistance.
Based on the value of the average estate, and the fact that some solicitors and specialists charge as much as 5% of the estate as a fee, the deceased’s benefactors may be missing out on around £7,200.
As Saga is keen to point out, there are plenty of outfits out there who offer this service at a far smaller cost (indeed Saga is one of them). But if you want to complete the probate process as cheaply as possible, then you can always do it yourself. This is only really a good idea if the estate is simple – if there are all sorts of complex investments and offshore accounts to go through, then utilising a specialist is a pretty good idea.
But if you are going to do it yourself, where do you start?
Start with a grant
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If you have been named as an executor in the deceased’s will, then you will need to apply for a ‘grant of probate’, a legal document which gives you the authority to deal with the assets of the deceased person. You’ll need to fill out a PA1 form, which you can find here (opens as a pdf).
If the deceased did not leave a Will, then a close relative will need to apply to the probate registry to deal with the estate. In this instance, you will need a ‘grant of letters of administration’, which will basically allow you to do the same things as an executor.
Things are slightly different in Scotland. If the deceased lived north of the border, you’ll need to apply for a ‘grant of confirmation’, and provide an inventory of the deceased’s assets. You can do that here.
It’s also a good idea to open a bank account for the estate early on, so that you have a single point of reference.
You will also need to consider whether Inheritance Tax needs to be paid on the estate. The current Inheritance Tax thresholds are £325,000 for single people and £650,000 for married couples and civil partners.
In most cases, the tax due will need to be paid off before the grant is issued.
The first step will be working out just how much each of the assets is worth. HM Revenue & Customs (HMRC) is a big advocate of using a professional valuer on things like property in the estate, highlighting that you’ll be able to reclaim the fees for these services from the estate later on. This is a really important area, as last year HMRC made an additional £70m from querying property valuations after the event, and imposing some punishing fines, as we explained in Taxman clamping down on Inheritance Tax!
Related how-to guide
Find out why you need to make a will and how to do it.See the guide
When valuing the estate, you’ll also have to include any gifts that the deceased made which are not exempt from Inheritance Tax. HMRC has put together a useful guide on how to value gifts which is worth a read.
Once the estate is valued, you’ll need to deduct any debts that need paying. After that, if Inheritance Tax is due, you’ll need to fill in the IHT400 form and IHT421 form, and if not then this is the form you’ll need to complete.
You’ll then need to attend an interview to confirm the details.
The cost of a grant
If, after the debts and funeral costs have been paid off, the value of the estate is less than £5,000 then there will be no charge for the grants.
If the estate is worth in excess of £5,000, then the fee will be £105, with extra copies of the grant costing £1.
Once the grant is in place, you will need to contact all of the asset holders to request payment of all of the funds belonging to the deceased. You can then distribute the funds among the will’s beneficiaries. There will be a lot of documentation involved here, with all of the correspondence with creditors and claimants, so be sure to keep it all filed away properly.
The downsides to doing it yourself
There are plenty of potential negatives to take into account before going down the DIY route. For starters, probate is a lengthy process, generally taking between six and nine months to complete.
You’ll also have to deal with disgruntled relatives, who may not be getting the inheritance that they were expecting. There’s also a lot of legal responsibility involved.
It’s no wonder so many opt not to do it alone – it can be a lot of hassle.
The half and half approach
It isn’t a black and white affair when deciding how to complete probate, whether to do it yourself or use an expert – you can actually do both.
One idea put forward by The Law Wizard is to do the first half of the process yourself, which is mainly arranging the valuing of the estate. You can then hand over the forms to a solicitor to complete and submit the legal firms on your behalf, usually for a fixed fee far of just a fraction of what they would charge if you had signed them up for the full probate process!
And if you do decide to make use of a solicitor, be sure to shop around. I know that gathering and comparing quotes is not exactly the top of your list of things to do if a close family member has just died, but doing so ensures that you get the best possible deal for you and your family. You can search for specialist probate solicitors on the Law Society website.
Getting your probate decision right will hopefully