What does an administrator of an estate do?
What is an administrator of an estate?
An administrator of an estate is the person who looks after the probate process including valuing the estate, paying any inheritance tax due, applying for probate, collecting the assets and distributing the assets to the beneficiaries.
The use of the term administrator in this sense is a loose one. The more formal term for someone administering an estate following someone’s death is a personal representative. There are different types of personal representatives depending on whether or not the deceased left a will.
What happens when there is a will?
Where there is a will, the personal representatives will be one or more people who have been appointed as executors in the will. It is those identified executors who are expected to prove the will to the Probate Registry to be given a grant of probate.
Who is the executor if there is no will?
Where there is no will (also known as an intestacy), the personal representatives can be any beneficiary entitled to the estate under the rules of intestacy. They can apply to the Probate Registry for a grant of probate called ‘Letters of Administration’. Once granted, they will formally be administrators of the estate.
What are the key duties of an administrator of an estate?
The primary responsibilities of an administrator include:
- take responsibility for property (e.g. insure any unoccupied property)
- sort out finances (cancel direct debits, etc)
- value the estate
- pay any Inheritance Tax due
- apply for a grant of probate
- pay any debts of the estate
- collect in all the estate assets
- distribute the estate in accordance with the intestacy rules
1. Take responsibility for property
Check that any property owned by the deceased is insured. Many home insurance policies don’t provide cover if the property is unoccupied. You need to notify any insurers of the death immediately and obtain separate house insurance as necessary.
2. Sort out finances
Notify banks, building societies, utility companies and insurance companies and cancel all direct debits, etc. Stop the payment/receipt of any salary, pension and state benefits. You can use the Tell us Once service. If you are not using a solicitor to help you, open an executor’s bank account to keep the deceased’s money separate from your own.
3. Value the estate
An administrator needs to value the estate and pay any inheritance tax due before you can apply for probate so you must identify the assets and liabilities of the deceased as soon as possible. HMRC recommends getting professional valuations of any assets worth more than £500. As a minimum, any property (e.g. a house or a flat) must be professionally valued. Go through all the paperwork and check with close family and friends to identify any assets you might have missed and any debts owing.
4. Pay any Inheritance Tax due
First, you must calculate if tax is due. No tax is due on any part of an estate that passes to a spouse, civil partner or charity. On the second death (i.e. when the second person in a couple dies), they have their own tax-free allowances (currently £325,000 + another £175,000 for property passing to a child or grandchild) and they also have any unused tax allowances that their spouse/partner had available as at the time of their death.
The rules surrounding Inheritance Tax are vast and complex. Where tax is payable (and where certain allowances are claimed that make tax not payable) the longer IHT 400 tax form must be completed. You should consider taking legal advice if you are unclear on the value of the estate, whether certain allowances apply, or how to complete the tax forms. Where Inheritance Tax is payable, it is paid at 40% unless more than 10% of the estate is going to charity, in which case, Inheritance Tax is paid at 36%.
Where Inheritance Tax is payable, banks may allow the sum due to be paid from the deceased’s account(s) – if there are funds to cover it – or executors could open an executor’s loan account and/or in certain circumstances, Inheritance Tax may be payable by instalments.
5. Apply for a grant of probate
These days it’s easy to apply for a grant of probate online. Any Inheritance Tax must have been paid. You then leave (currently) 20 working days before applying for the grant. A grant of probate allows you to deal with the deceased’s estate, i.e. allows you to collect the assets, pay debts and distribute the estate/money to the beneficiaries as set out in the will.
For low value estates you may not need probate as banks, etc may not require it for you to deal with the deceased’s money.
It will be useful to get several copies of the grant or probate, for the same reason it is useful to get several death certificates.
6. Pay any debts of the estate
In addition to paying debts that you are aware of, it is wise to advertise for creditors under s.27 Trustee Act 1925. This protects the executors against personal liability for debts of the deceased of which they were not aware. It does not prevent creditors pursuing beneficiaries of the estate, however.
7. Collect in all the estate assets
You will need multiple copies of the grant of probate to collect in all the deceased’s assets. Make sure that you keep the deceased’s money separate from your own.
8. Distribute the estate in accordance with the intestacy rules
You need to prepare estate accounts setting out what money and assets have been collected, debts and legacies paid, and the net value of the estate remaining. This helps explain to the beneficiaries the sum(s) they are receiving and why.
You must check whether or not the beneficiaries are bankrupt by checking on the Individual Insolvency Register. It’s a good idea to wait two months after the date of any S27 notices before distributing in case there are any unknown debts.
Who can be an administrator of an estate?
In an intestacy, an administrator, i.e. the person who applies for letters of administration, can be any beneficiary under the rules of intestacy. For all administrators, normally a grant of probate will be necessary to deal with the assets, i.e. to sell them or to collect them in and distribute them to the beneficiaries.
Can administrators be liable for anything?
Claims can be made against an administrator for up to 12 years after the death should there be an allegation that any of their duties were not carried out correctly. An example might be a beneficiary who the administrator was not aware of and who did not benefit under the intestacy rules when they should have done.
If you would like any help or advice on the duties of an administrator of an estate, or any issues relating to probate, please do not hesitate to contact a member of our Probate Team or get in touch on 020 8492 2290.