What is a Small Estate in Probate?
29 October 2018
When someone dies, in order to deal with their assets and wind up their affairs it may be necessary to go through a process called Probate. Although a large majority of Estates in England and Wales will require Probate in order to deal with the various assets, there are a number of exceptions to this, including small Estates.
Depending on the value of the assets in the Estate, and how they are held, the Estate may be considered as a "small Estate" and would not require Probate.
What is Probate?
Probate is the legal and financial process of dealing with someone's Estate after they have died. Probate is granted through a document called a Grant of Representation. If Probate is required on an Estate, then this document will need to be obtained and sent on to banks and other organisations so that they can close accounts and wind up the deceased person's affairs.
Defining a Small Estate
Unfortunately there is no definitive definition of what a small Estate would be. This is because each bank or other financial institution is free to set their own limits on the value they will consider releasing without seeing a Grant of Representation. Some institutions have relatively low limits of around £5,000, whereas some will encash the assets if the total amount held is under £50,000. For a list of the main UK banks and their individual Probate thresholds, see Bank Limits for Probate.
Different financial institutions also have different meanings about the limit of funds that they will consider releasing without sight of a Grant of Representation. Some will consider the combined value of the Estate as a whole, whereas others will only consider the value of the assets or investments held with them. Essentially if one financial organisation in the Estate requires a Grant of Representation, then you will need to obtain one for the whole Estate.
For this reason, it is important to try to diagnose early on whether or not a Grant of Representation will actually be required to deal with the Estate. It can be time consuming and costly to apply for a Grant if there is no real requirement for this, and similarly it can be frustrating to try to deal with an Estate without a Grant, only for it to be required half way through the Estate administration.
If you are unsure of whether Probate is needed, our specialist Probate Advisory team will be able to discuss the Estate assets with you and help you to determine if a Grant of Representation is likely to be required.
As well as the value of the assets, the way that they are held may also determine whether or not a Grant of Representation is required. Assets can either be held in a person's sole name, or jointly with another person. Assets which are held jointly usually pass to the surviving asset holder, without a Grant being needed.
There are different rules relating to the ownership of property and land, which affect whether a share of property passes to the surviving co-owner, or passes under the terms of the person's Estate. If you are unsure about how a property is owned it is always recommended to seek specialist advice.
If an asset is held jointly with another person, and passes by survivorship, then usually only a copy of the Death Certificate will be required to transfer the asset into the survivor's sole name.
Dealing with Small Estates
If, having determined the values of the Estate assets and requirements of the various banks, a Grant of Representation isn't required then there are a number of steps to take in order to deal with the assets.
Most asset providers will need to see a copy of the Death Certificate in order to confirm that the asset holder has passed away. If the asset can be encashed or transferred without a Grant of Representation then the bank will normally provide a document called a Small Estates Declaration. This document needs to be completed and signed by the Executor or person administering the Estate, to confirm that the value of the asset(s) is below the bank's threshold. A Small Estates Declaration provides confirmation that a Grant of Representation is not being applied for, and confirms that the money is going to be paid to the correct person, who is responsible for dealing with the Estate.
Some asset providers may also require a copy of the Will, or Birth and Marriage Certificates, to confirm that they are paying the Estate money to the correct person.
Inheritance Tax without a Grant of Representation
There are very rare cases where an Inheritance Tax return will need to be completed and submitted, even if a Grant of Representation is not being obtained.
Examples of this might be where a person gave away all of the assets before they passed away, and so there are no assets to administer but the value of those lifetime gifts may still need to be declared. Similarly if a person had an interest in an asset held in trust for them, this would likely not need a Grant of Representation, but may still require an Inheritance Tax return.
Again, it is important to seek specialist advice if you have any concerns about Inheritance Tax during the Probate process.
If a Grant of Representation Is Required
If you have been advised that a Grant of Representation is required in order to deal with one or more assets, you can either choose to apply for this yourself if you feel confident in doing so, or you can instruct a professional to assist you with this.
At Co-op Legal Services, we offer a Complete Probate Service to take away the stress and worry of the Probate process at a difficult time. This Service includes valuing the Estate assets, applying for the Grant of Representation, identifying and contacting Beneficiaries, calculating Inheritance Tax and dealing with HMRC, cashing in the assets (including the sale of any property), and distributing the Estate to the Beneficiaries.