Can accountants offer a probate service?
What is probate?
Probate gives a person the legal right to handle the estate of the deceased. It’s sometimes called administering the estate.
Traditionally, the legal profession and legal departments in major banks have coveted their position of holding wills. Some are a named executor, putting themselves in pole position in the lucrative activity of probate when a person dies. Many firms and banks charge a percentage of the estate value as their fee, irrespective of the amount of work involved. This can lead to a relatively high fee where the only valuable asset may be the family home, thanks to inflation-busting property price rises over recent decades.
The end of a monopoly
You as a tax advisor are already involved when your clients die, perhaps preparing the self-assessment return up until death or at the very least bringing their tax affairs into order. Perhaps you wish to progress this to see the job through, obtain probate and distribute the estate.
The legal world has been shaken by the Legal Services Board (The Probate Services (Approved Bodies) Order 2009) which allows accountants to undertake the probate. This move was strongly resisted by the legal profession, which is unsurprisingly disappointed about potentially losing what has always been an almost automatic income stream. It does however present a very lucrative opportunity for advisors like you.
Qualification Requirements
The ICAEW is now a designated regulator and licensing authority for probate. This means that you can become a probate practitioner if you are qualified through another accountancy or taxation body through the ICAEW. There are exemptions if you are a member of STEP. Guidance on the exact qualification requirements can be found on the ICAEW website (see Follow up ).
The deceased leaves a Will
A will should name one or more executors who are responsible for collecting in all the money of the estate, paying any debts including IHT, and distributing any legacies. The executor applies for a grant of probate from the Probate Registry. The grant is a legal document confirming that the executor has authority to deal with the deceased person’s assets.
The deceased leaves no Will
In these circumstances intestacy rules apply, and once it’s established who is entitled to administer the estate, an application is made to the Probate Registry, and in this case an application for a grant of letters of administration is made.
Is probate required?
A grant of probate may not be required if the estate either passes automatically to the surviving spouse/civil partner because it was held in joint names, e.g. savings accounts, or if the estate does not include land, property or shares.
Banks will usually release bank accounts of the deceased if the total value of the estate is under £5,000, but this is not always the case. Each financial institution has its own rules and you may still need to apply for a grant.
The Forms
There are numerous forms involved when applying for probate, from both the Probate Registry and HMRC - the latter include those detailing the assets and liabilities of the estate and calculation of any IHT to pay.
Probate Registry forms: PA1: the probate application form; PA1 A : guidance notes; PA3 : a list of probate fees; PA4 : a list of probate registries and venues. The probate registry forms can be downloaded online (see Follow up ).
HMRC forms:Form IHT205 needs to be completed as part of the probate process if the deceased’s estate is an excepted estate. This is usually one that doesn’t pay IHT - where the value of the estate is no more than the nil rate band or no more than £1 million and left largely to a spouse, civil partner and/or charity.
Estates that aren’t excepted
Where the estate is not excepted, the following forms are required: IHT400 : the inheritance tax account; IHT421 : probate summary (sent to the Probate Registry only); IHT422 : the IHT tax reference number; IHT423 : form to authorise payment of IHT out of deceased’s bank account; C4: corrective account.
When no tax is payable Forms PA1 and IHT205 are sent to the Probate Registry to include a cheque or postal order made out to HMCS (Her Majesty’s Court service) for the application (see PA3 for latest fees), the original will and codicil (if relevant), an official copy of the death certificate and any other documents requested on Form PA1 .
If IHT is owed, it is important to complete Form IHT422 to request an IHT reference number and payslip to go with FormIHT400 . This should be sent immediately in order not to delay probate. All the HMRC forms can be downloaded online (see Follow up ).
Pro advice. Form IHT400 needs to be completed and sent directly to HMRC’s Capital Taxes Office, once the deceased’s unique reference number is issued.
Forms PA1 and IHT421 , together with the cheque (or postal order) payable to HMCS, original will, copy of death certificate and any other document required on Form PA1 are sent to the Probate Registry.
In normal circumstances assets cannot be accessed prior to a grant of probate, but if the deceased had a bank account the Capital Taxes Office provides Form IHT423 on which to apply to that bank for IHT to be paid out of their account.
In reality probate will not be granted until the IHT is paid which can create a problem in that assets cannot usually be released until there is probate, and there are no other funds to pay the tax.
Caveat and oath
An individual can stop the issue of a grant of representation. This is called a caveat - it stops probate from going ahead, e.g. because of a dispute over who can apply for a grant of representation or whether a will exists. A caveat lasts six months. Completion of Form PA8 is required.
All the information provided to the Probate Registry is then transferred to a formal legal document known as the executor’s oath. This is the oath that needs to be sworn either at the Probate Registry or with an approved body.
Where there is no IHT to pay the grant of probate will normally take a couple of weeks at most. Where there is IHT to pay this may take a little longer.
Distribution of the Estate
Attached to the grant of probate will be a copy of the will (now a public document). The estate can then be administered and distributed in accordance with the instructions of the will.
Pro advice. It’s worth noting that any property that passes by survivorship does not devolve to the estate but passes automatically to the survivor.
Usually a separate executorship bank account or client account is opened to collect money due to the estate, e.g. a tax refund, dividends, etc.
Qualification requirements
Probate registry forms
HMRC forms
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