Excepted Estates – When is Probate not required?
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Probate is generally required where assets (of more than £5k) are held in the deceased’s name.
A grant of probate is the legal authority given to executors to allow them to ‘administer’ a deceased’s estate. Think of it like the ‘driving license’ – the legal authority (and only legal authority) that permits executors to do their job.
Do Executor’s always need Probate?
There are some exceptions where a grant of Probate may not be needed by the executors. This might include where any assets were held jointly with other people (so something called the ‘right of survivorship’) applied to the assets and they passed automatically to the surviving joint owner and irrespective of any will. Also, the estate might be sufficiently small in value to remove the need for probate.
Who decides if Probate is needed?
Circumstance (not people) decide whether probate is needed or not. In a nutshell, where there are assets that need to be dealt with (for example in the deceased’s sole name), then probate will be required. For example, a bank will not pay out a deceased’s bank account to the executors without being presented with probate.
Does Probate need an Oath to be sworn?
Probate applications have come a long way, from having to swear an Oath and submit a bunch of paperwork to an online application process where the Probate Registry no longer requires wet signatures.
What is an Excepted Estate (where Probate is not needed)?
Further changes were introduced recently to streamline and digitalize the probate process and, in essence, make it easier for probate practitioners and individuals to obtain the Grant of Probate where an estate is considered an “excepted estate”.
Although you still need to value the estate and compile information about the estate, there is no longer a requirement for a form IHT205 to be completed and submitted with your probate application.
What are the Requirements of an Excepted Estate?
Probate is not needed (ie it is deemed an ‘excepted estate) when one of the following applies:-
- The value the estate is below the current inheritance tax threshold (£325,000);
- The estate is worth £650,000 or less and any unused threshold is being transferred from a spouse/civil partner who died first;
- The deceased left everything to a spouse/civil partner living in the UK or to a qualifying charity, and the estate is worth less than £3 million (this has been increased from £1 million, which means that more estates will fall into the “excepted estates” category)
- The deceased was living permanently outside the UK when they died and the value of their UK assets is under £150,000.
If Inheritance Tax (IHT) is payable, then Probate will be required.
What is NOT an Excepted Estate?
Any estate which requires Inheritance Tax (IHT) to be paid can not, by definition, be deemed an excepted estate. A full probate application will be needed as will information need to be submitted to the Revenue, along with IHT being paid.
When does an IHT form need to be submitted for Probate?
A full IHT return is also needed, even if there’s no tax payable, if the deceased:-
- gave away over £250,000 in the 7 years before they died
- if the estate includes a trust you may need to complete a full account and you should seek legal advice
- had a life insurance policy that paid out to someone other than their spouse/civil partner,
- gave gifts then continued to benefit from them in the 7 years before they died,
- left an estate worth more than £3 million
- had foreign assets worth more than £100,000
- was “deemed domiciled” outside the UK
- was living permanently outside the UK when they died but had previously lived in the UK
What has changed with Probate (Excepted Estates)?
Once you’ve determined that an estate is an ‘excepted estate’ and there’s no tax to pay, you no longer need to give full details of the estate.
The old IHT205 & IHT217 forms are now not needed, and you need to simply complete the probate application online. You still need to value the estate and compile all the information, as you will be asked to give details of the gross and net values, which then appear in the Legal Statement that the executors need to sign to make the probate application.
What limit is there on an Excepted Estate?
The gross estate limit for an excepted estate has also been increased from £1 million to £3 million, meaning that, if the estate is less than £3 million and the assets pass to an spouse/civil partner or a charity, the Executors can apply for the grant using the process above and without having to submit the IHT400 to HMRC.
Help with Probate or Excepted Estates?
Despite all these changes, probate applications and estate administration can be complicated and time-consuming and we recommend getting legal advice. If we can help you or you have any questions, then please do not hesitate to contact our expert probate solicitors at pcd@qlaw.co.uk.
Hi Neil
So if an estate is an excepted estate and probate has been granted there is then no need to supply any further returns to HMRC regards IHT provided the status of the excepted estate remains the same – i.e. if the values increase/decrease on realisation/valuation but in aggregate below the thresholds. Correct?
So, its perhaps best to think of it in descriptive rather than named terms! If an estate is or becomes liable to IHT, then the Revenue must be notified and they will want their slice of the action! Inheritance Tax is of course a hot topic and may change in the Autumn Statement on Weds? Back to you query! The question then (whether on applying for probate or after) is what is the value of the estate? Most things can be set in stone and so do not change. So a bank balance is what it is – ie the capital balance on the date of death, plus any uncredited accrued interest. A share holding is what it is – valued at close of business on the date of death on a ‘quarter up’ basis. However, perhaps the 3 big variables that can change things post probate include houses (as the value is subjective); business values (same reason as houses); and of course lets not forget assets being found that the executors knew nothing about when probate was applied for (quite common). But the value at date of death is still key. So take for example a house, and lets assume the property market is ‘hot’ around and beyond the date of death. The probate value will be the realistic price that would be achieved at date of death. But, the house may not sell for some time after that, and prices may be rising. Whilst this may not impact the IHT value of the house (if it can be demonstrated the value at date of death was correct, the IHT value will form the ‘base cost’ for CGT purposes and therefore may give rise to a Capital Gains Tax (CGT charge) instead!
Hope this helps.
(Please note this is NOT intended to be specific legal advice and should not be relied upon as such. You should take independent legal advice on any specific queries you have)