What Are Interim Payments in Probate?
24 April 2019
Probate commonly takes between nine to twelve months to complete, but this does not mean that beneficiaries will necessarily need to wait until Probate has finished to receive any money from the Estate. It may be possible for some payments to be made to beneficiaries while the Estate administration is still ongoing – these are called interim payments.
How Interim Payments Work
The Probate process involves a significant amount of legal, tax and administrative work, and some Estates will take longer than others to complete. At the end of the Estate administration, beneficiaries will be paid their final entitlement from the Estate.
Interim means 'in the intervening time' and interim payments are when beneficiaries are paid a proportion of their entitlement whilst the Estate administration is still ongoing.
An interim payment may not always be possible. It will be up to the Executors or Administrators of the Estate to assess the risks and determine how much money, if any, can be paid out to beneficiaries as interim payments.
Interim Payment Example
A common example where an interim payment would be considered and likely paid out would be as follows:
An Estate administration commences in January 2018 and it is forecasted to take 9-12 months to complete, perhaps longer, as there is a property which is to be sold on the open market.
The Grant of Probate is obtained in the Estate within a few months and by month five (May 2018) all the cash assets in the Estate (bank accounts, investments etc) have been cashed in and are held in the Estate. These funds total £250,000. The property is sold subject to contract.
There are some liabilities (debts) in the Estate to pay, which the Executors calculate at about £35,000. The Executors also, quite wisely, decide to leave a fair reserve of funds in the Estate of £25,000. This is in case of any unexpected expenses and, whilst the property is not yet sold, it remains part of the Estate and therefore there will be ongoing costs to run and maintain the property.
So, whilst not all funds can be distributed in May 2018, the Executors have calculated and agreed to distribute £190,000 in interim payments. These interim payments are made to the entitled beneficiaries in their various proportions.
The Estate administration continues into month ten when the property sale completes. Shortly afterwards, final distributions are paid and the Estate administration concludes in month eleven.
Points to Consider Before Making Interim Payments
In any Estate, there will be a number of points that will need to be considered by the Executors before making interim payments. The following matters could potentially limit their ability to arrange interim payments:
- Expiry of statutory advertisements
- HMRC Inheritance Tax, Income Tax and Capital Gains Tax clearance
- Any potential/ongoing claims against the Estate
- Department for Work and Pensions investigations
- Missing beneficiaries
- Liquidity concerns of the estate
Decisions will need to be made carefully by the Executors, in order to protect themselves in their legally authorised role. If they over-distribute and then find that there is insufficient money left in the Estate to settle outstanding liabilities, they could be held personally liable to make up the shortfall. The Executors also have a duty to protect the assets in the Estate and, ultimately, the entitlement of the beneficiaries.
For this reason, we would always recommend seeking professional advice from a Probate Specialist if you are in any doubt at all as to whether to make interim payments from an Estate.