New Year, New Probate Rules

12th January 2022 Wills, Trusts & Estate Planning

The New Year brings a time of resolutions for many. A resolution to take up a new hobby, to eat healthy or to exercise more. This year, HMRC and the Probate Registry are joining in with their own resolution to do things differently….and this resolution will last longer than January 2022!

The resolution is to alter the procedure for applying for a Grant of Representation “Grant” for what HMRC expect to be 90% of estates.

A Grant provides the legal right for the personal representatives to deal with the deceased’s estate (property, money and possessions) when they die.

The Grant is often essential for personal representatives to be able to administer an estate correctly.

The Grant allows the personal representatives to collect in assets, cash them in and transfer the balance of the estate (once any liabilities have been settled) to the beneficiaries.

As of 1 January 2022, the reporting requirements for estates not expected to pay Inheritance Tax will be altered, effectively reducing the reporting requirements for a large number of estates. Whilst the reporting process is being altered, the calculations remain the same and the probate application will require the same investigations and the same calculations to be carried out. It is therefore helpful to consider the current rules before exploring the changes in more detail.

Current Reporting Requirements

Currently, for deaths that occurred on or after 6 April 2011, all estates must complete an Inheritance Tax return when applying for a Grant.

Until now, in order to determine which form is to be used it is first necessary to determine whether the estate is one of the following and therefore classed as an excepted estate:

  • Low value estate
  • Exempt estate’ or
  • Where the deceased died domiciled outside the UK provided certain conditions are met.

In order to make that determination, the personal representatives of the estate must begin a period of information gathering. This involves determining the value of the estate by ascertaining the date of death values for bank accounts, ISAs, investments and property owned (amongst other assets) and investigating whether any liabilities were owed by the deceased.

Once the information has been gathered, the relevant Inheritance Tax form can be completed. Generally speaking, for ‘excepted estates’ HMRC currently require an IHT205 to be completed only.

If there is Inheritance Tax to pay or if a number of other conditions are met (and the estate does not fall into the category of excepted estate), personal representatives are required to complete and submit the longer form IHT400 and accompanying schedules.

The appropriate return can then be submitted to the Probate Registry with the application for the Grant. Once the Grant has been obtained steps can then be taken to administer the estate.

Changes being introduced

The changes being introduced will only apply to estates where the individual passed away on or after 1 January 2022. For estate of individuals who have died before this date, where no Grant has been obtained, the above process will still be used.

For deaths on or after 1 January 2022, ‘excepted estates’ will no longer have to complete an IHT205 as the reporting requirements have been reduced. This therefore means that for most (but not all) estates that are not required to pay Inheritance Tax there will be no need to complete an Inheritance Tax Return when applying for a Grant of Probate. Personal representatives must still however declare the net and gross value of the estate in the application (meaning that the same information gathering and tax calculations will need to be carried out).

The value limit for exempt estates is also increasing from £1 million to £3 million meaning more estates are likely to fall within the exempt estate limits.

Whilst the requirement to complete an IHT205 has been removed, the vast majority of work involved in obtaining a Grant remains the same. The information gathering is still required to determine the value of the estate. It is imperative the correct value is determined to assess whether the estate is subject to inheritance tax or not as this impacts how the Grant is obtained.

JMW’s Will, Trusts and Estate planning team are experts in helping personal representatives to administer estates effectively for loved ones and can be appointed in your Will to act as a professional executor to administer your estate.

Should you require any information on obtaining a Grant of Probate or any estate administration enquiry, please do not hesitate to contact a member of our team.

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Ellena Mottram is a Trainee Solicitor located in Manchesterin our Trainee Solicitors department

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