George Hay Chartered Accountants were one of the first accountancy firms in the country to obtain a licence to carry out non-contentious probate work. In our monthly column, we give you an insight into the process and provide an update on what is happening in the world of probate and estates.
Earlier this year, the Government announced changes to the filing of IHT forms and the granting of probate. They heralded the abolition of Form IHT205 as “simplifying the process”.
However there does still seem to be, in our opinion, a lot of administrative bureaucracy.
A reminder that the process of obtaining authority to act is a two-fold process: –
Firstly, there is an application to HMRC via Form IHT400. Secondly, an application to the Probate Office, a division of the Court Service, to get the grant.
Under the following conditions, the first part of the process can be bypassed if: –
- The Estate is below £325,000
- The Estate is below £650,000 and any unused threshold is being transferred from a previously deceased spouse’s estate.
- The Estate is less than £3m and everything is being left to charity or a UK domiciled spouse.
The above is subject to the overriding condition that no IHT is payable (IHT could be payable if there are lifetime gifts or trusts).
It is not possible to bypass the first route simply by saying no IHT is payable. For example, there may be no IHT due because of reliefs such as Business Property Relief or Agricultural Relief. In such cases, the form IHT400 needs to be submitted.
These situations are really frustrating. Quite often we are submitting an IHT400 to HMRC with the statement “we have not included an IHT reference number as no IHT is due, but the estate does not qualify for exemption”.
Furthermore, you are not allowed to apply to the Probate Registry for 4 weeks after you have submitted the IHT400. So, even if no IHT is due, a four week delay has been built into the system!
Do I need Probate?
The answer in most cases is yes.
You do not need to get probate if an asset such as a bank account or a property is jointly owned (provided the property is not owned as tenants in common – click here).
These assets pass by survivorship i.e., survivor(s) take all and not by Will. Therefore, probate is not needed.
Most financial institutions have limits in which they will pay to a beneficiary without the need of probate. These limits can vary enormously. Most will pay out £5,000 but we have seen £20,000 and in one case, £50,000.
The problem is that you only need one institution to say no, and you are in the world of probate.
Last year, one of our clients died. He had quite a few accounts and assets and his widow managed to get most of them paid out. Unfortunately, one institution refused to budge for £10,000 even though others had paid out more as his widow was the sole beneficiary of the Estate. Unfortunately, you cannot just write ‘Bank of X £10,000’ on the form, you need to put the details of the whole Estate, creating more costs and delays.
For deaths after 31st December 2021, the Government announced the abolition of Form IHT205, the “baby” IHT form which was sent to the Probate Office where no IHT was payable.
However, the numbers that were on the IHT205 were replicated on the Probate application form. Although the actual IHT205 has been abolished, the numbers still have to appear on the Probate Form and therefore detailed work by the executors still needs to be carried out, resulting in few savings.
We would always encourage our clients to ensure that not only do they have a Will in place, that their assets are held in a probate-friendly manner, to ease the administrative burden going forward.
To talk to one of our experts about undertaking Inheritance Tax planning contact us on 01480 426500 or fill in our online enquiry form.
Authored by Director of GH Probate Ltd., Barry Jefferd.
Our Probate service is provided through GH Probate Limited. GH Probate is the trading style of GH Probate Limited. Registered in England and Wales number 9630102. Registered Office: St George’s House, George Street, Huntingdon, Cambridgeshire PE29 3GH.
Authorised to carry out the reserved legal activity of non-contentious probate in England and Wales by the Institute of Chartered Accountants in England & Wales.