How Long Before the Balance of an Estate Can Be Distributed?
16 March 2017
The short answer is that it all depends on the deceased person’s Estate. In this article we explain the Estate administration process in England and Wales, which must be completed before the balance of an Estate can be distributed.
Once all the debts, taxes and legacies have been paid from a deceased person’s Estate, their Personal Representatives can distribute whatever is leftover (known as the residue) to the Residuary Beneficiaries.
Getting a Grant of Probate
The administration period of an Estate begins immediately after the death and ends when the Personal Representatives are in a position to pay the residue of the Estate to the Beneficiaries or the Trustees; if there is a Trust in the Will.
By law the Personal Representatives of a deceased person are under a duty to “collect and get in the real and personal Estate of the deceased and administer it according to law”. The duty is an onerous one as the Personal Representative will be deemed personally liable for any breaches, even if they are accidental. The main types of breach of duty include:
- Failing to protect the assets of the Estate
- Failing to pay people who are entitled to benefit from the Estate
Consequently, a Personal Representative must act diligently and ensure that all reasonable steps are taken to ensure a smooth and, above all, correct administration of the Estate.
In most, although not all Estates, a Grant of Probate will be required, or if there is no valid Will a Grant of Administration will be needed. This gives the Personal Representative the authority to deal with the Estate.
The process for obtaining a Grant involves completing an IHT205 or IHT400 (for taxable Estates) HMRC form which represents an inventory of all the assets and liabilities as at the date of death. This is submitted together with an oath sworn by the Personal Representatives explaining their right to take a Grant, the Will and Codicil (if applicable), and any potential affidavits and/or renunciations of their right to act.
Collecting Estate Assets
The Personal Representatives are under an obligation to collect all the assets which pass under the Will or Intestacy Rules. In most cases, the Grant must be produced to the relevant financial institutions for the funds to be released to the Estate.
Settling Estate Debts and Liabilities
As soon as funds are available in the Estate, the Personal Representatives should begin to pay the deceased’s outstanding debts and expenses before any money is given to the Beneficiaries. Various administration expenses, such as Court fees and Conveyancing fees, will arise during the administration process and will have to be settled from time to time.
The Personal Representatives must act in the best interests of the Estate and the Beneficiaries at all times. They must always act in accordance with the provisions of the Will, the Beneficiaries’ wishes and consider potential tax consequences. If there are any debts which cannot be settled, either because the exact amount is unknown or being disputed, the Personal Representatives should hold back sufficient funds to ensure that the debts can be paid.
If statutory notices for undisclosed creditors are placed, the Personal Representatives will need to wait for their expiry date before any distributions can be made (minimum two months after publication).
It’s also important to establish whether the deceased was in receipt of any benefits as this fact can sometimes trigger an investigation carried out by the Department for Works and Pensions (DWP). These can take quite a significant number of weeks and a distribution cannot be made whilst the investigation is ongoing.
Moreover, the Personal Representatives must establish whether there is a risk of a claim being made under the Inheritance (Provision for Family and Dependants) Act 1975. A claim can be made by any relative or financially dependent person who has been left out of the Will. Such claims have a major impact on the Estate as any distributions must be delayed until the claims have been correctly dealt with. However, any potential claim must be made within six months of the Grant of Probate being issued.
Paying the Legacies
Once the debts have been paid, the statutory notices have expired and the other steps have been completed, the Personal Representatives should be able to pay any legacies. They may also consider making interim distributions to the Beneficiaries. There are different types of legacies:
- Specific Legacies – these are paid or transferred before the division of the balance between the Beneficiaries
- Pecuniary Legacies – these are cash gifts and if they are not paid within one year of death interest is added to the sum.
The payment of legacies will, however, be delayed until any outstanding issues have been resolved. There are various reasons why this might happen, including an investigation by the Department of Works and Pensions, difficulty selling a property, tax issues and claims being made against the Estate.
Final Distribution of the Residuary Estate
Once the deceased’s funeral expenses, debts, and any legacies have been settled, the Personal Representatives can consider making a final payment of the balance of the Estate. However, if any matters remain outstanding, they must ensure that ample funds remain available to cover these. Outstanding matters could relate to Inheritance Tax, Income Tax, or Capital Gains Tax.
Once the position with HMRC is finalised, the Personal Representatives can draw up the Estate accounts. The purpose of these accounts is to show all the assets and liabilities of the Estate, as well as the remaining balance for the Residuary Beneficiaries.
As soon as all the Beneficiaries approve the Estate accounts, the Personal Representatives can proceed with making the final distribution of the residuary Estate. The Personal Representatives have a duty to distribute the rest of the Estate in accordance with the Will or the Rules of Intestacy.
So, as you can see, it’s difficult to say exactly how long it will be before the balance of an Estate can be distributed. The amount of time it takes to administer an Estate varies depending upon a number of factors, such as the complexity of the Estate, whether there is a property to sell, whether there are any contentious issues to overcome, and whether any of the Beneficiaries are missing.