Distributing the Estate
This process involves collecting in all of the assets, paying creditors and taxes, and then finally distributing the Estate to the beneficiaries following the Will or the Rules of Intestacy.
You will only be able to do this once you have a Grant of Probate, or Grant of Letter of Administration, giving you permission and authority to administer the Estate. Once you have access to the Estate, it is also worth setting up an ‘executorship account’, which is a separate bank / building society account which can be used to manage the deceased’s Estate. This will ensure that your personal funds and the deceased’s funds do not get mixed up, and will also make it easier for you to produce the deceased’s Estate accounts.
Any debts that the deceased may have had when they passed away will become a liability on their Estate, not the responsibility of those inheriting the Estate. However, as an Executor / Administrator of the estate, you will be responsible for paying any outstanding debts from the Estate, and ensuring that even debts or creditors who have not initially come forward, are paid. The Executor / Administrator will be held responsible if they have not done what is reasonably expected of them to ensure all creditors and beneficiaries are paid. Therefore, you should place a notice in The Gazette and local newspapers to allow for any undisclosed debts and creditors to come forward with claims against the Estate, and allow two months for any of these claims. Once you have done this, you will have done what was reasonably expected.
You should make a list of everything the Estate owes, and go through documents and financial statements of the deceased to find any remaining debts. You may also want to contact any known creditors, and explain the situation and ask for a statement of anything owed.
Order of Priority
To ensure that the Estate has sufficient funds to pay off secured debts and the executor who may have paid for funeral costs from their own bank account, there is an order of priority when paying the Estate’s debts. This is because if the Estate has insufficient funds to pay off all debts, then remaining less important debts may have to be written off.
The Order of Priority is as follows:
Secured debts: These are taken out against certain items or assets, such as a car loan or home mortgage
Funeral expenses and costs incurred during administration of the estate: You may claim for out of pocket expenses, which may include paying for copies of death certificates and grants, but you may not claim for time taken to administer the Estate. However, you may pay a professional executor, a solicitor, for their time taken to administer the Estate
Unsecured debts: These are things such as student loan, where the deceased has borrowed money and agreed to make regular payments until it is fully paid back
Money owed to family and friends
It may be that the deceased had insurance that will pay off certain debts, therefore you should try to identify these before paying for them out of the Estate.
While usually debt does not get inherited, if the debt was jointly owned, such as a loan or a mortgage involving one or more people, then the outstanding debt will pass to the surviving people involved. You should still inform the creditors of the person’s death and ensure they are removed from any future payments.
When it comes to the deceased’s individual debts, these will be paid by using assets that are part of the residuary Estate first. The residuary Estate is the remainder of the Estate / gifts that has not been specifically left to an individual or group of people. If the residuary Estate does not cover the debts, then you will need to use gifts of cash, and then reduce any gifts of cash proportionally. If there is still debt that needs to be covered, then specific items that have been left will need to be sold to raise the amount needed to pay off the deceased’s debt.
You should be aware of any outstanding matters, such as Inheritance Tax still due, or Capital Gains Tax. You must ensure that there are funds to pay for these prior to distributing assets to the Beneficiaries
Distributing the Estate to Beneficiaries
Before distributing the Estate to beneficiaries, you should draw up the Estate’s accounts, to show all of the assets and liabilities the deceased’s estate had, as well as any remaining balance for residuary beneficiaries.
Once the beneficiaries have approved these accounts, then you may proceed with making final distributions of the Estate.
How the Estate is distributed will depend on whether there was a Will or not. You should distribute the Estate in accordance with the Will if there is one or follow the Rules of Intestacy if there is no Will.
Changes due to Coronavirus
Coronavirus restrictions have inevitably caused some problems around administering the Estate and finally distributing the estate to beneficiaries. One of the main reasons for this is due to a pause and delay in property sales, and therefore meaning delays in beneficiaries receiving their inheritance. The delay and impact caused by Coronavirus will also be seen on property prices, and the value of the Estate.
It is usually acceptable for beneficiaries to express concern if they believe the Executors / Administrators of the Estate are not carrying out their duties as expected and if there is an unreasonable delay. However, there may now be delays due to legitimate reasons that are related to the current circumstances due to Coronavirus. Therefore, beneficiaries should be aware of delays incurred due to these circumstances.