How to Administer an Estate
Getting started to administer an estate
Many people have only a vague idea about how to administer an estate of a relative or friend.
When someone dies there are usually a lot of practical things to sort out. There are also often legal and tax issues involved as well. It can be difficult to decide what to tackle first. In this BE My Own Lawyer ‘How to Administer an Estate Guide’ I’ve put together a selection of things all executors need to know to help you get started.
10 first steps for executors
# 1. Arranging the funeral
People often think the deceased’s ‘next of kin’ are the persons with the legal right to arrange a funeral, but it’s not necessarily that simple.
In law, no one ‘owns’ the body of a deceased person. There are certain people who have the legal responsibility to take control of the disposal of a body.
The appointed executors (if there isn’t a Will they’re called Administrators)* of the deceased are legally responsible for arranging the burial or cremation. The deceased may have purchased a pre-paid funeral plan but that doesn’t override the executors’ authority. It’s still the executors who have the legal obligation to make sure everything is arranged in the way the deceased wanted. If there isn’t a pre-paid funeral plan the executors have the obligation to arrange payment of the funeral costs from the estate.
Of course, no one wants there to be any argument or difficulty between executors and family members about the funeral. But it is your responsibility as executor to make sure there’s money available to pay for the funeral and any related expenses. This means you need to be prepared to take charge of the arrangements and if necessary, limit any spending that could be too expensive for the estate to bear.
To find out more about the law on funerals take a look at our Guide to Arranging a Funeral here
# 2. Finding the Will
It’s absolutely vital to look for a Will. It’s very unwise to assume the deceased didn’t make a Will, even if they never spoke about making one. Lots of people don’t like to talk about their Wills. There may be a Will even if you can’t find any mention of one in the personal papers of the deceased.
If you start administering the deceased’s estate without making all reasonable efforts to find a Will, you could be held liable for any loss suffered if it turns out there is a Will, after all.
Make sure the Will is the last one made by the deceased. Many people make several Wills during their lifetimes. Start by checking the date – if the Will is dated more than 5 years before the person died it might not be their most recent Will. You should check to find out if there’s a more recent Will.
Our How to Find a Missing Will Guide gives more information and useful tips on searching for a Will.
# 3. Know Your Duties
There are a number of statutory duties that apply to all executors. It’s a good idea to get familiar with them as soon as you can. If you don’t, you could accidentally breach some of those duties. That could lead to your actions being challenged in the courts; you might even be held personally liable. The statutory duties can be found in a number of Acts of Parliament. One of the main pieces of legislation is the Administration of Estates Act 1925.
This Act is a good starting point for getting to know your legal obligations. It’s been amended a number of times over the years and other pieces of legislation have added to it. The Trustee Act 2000 imposes a duty of care on executors. The standard of care required from executors is what a reasonable person would be expected to do in the circumstances. Executors who don’t match the standard of care that is reasonable to expect could be taken to court and may have to compensate the beneficiaries.
In our How to be an Executor Workshops, we look at the statutory duties in more detail. Check out our Events page for more information about courses and events. BE My Own Lawyer members get a discount on our workshops.
# 4. Paying Debts
Debts don’t die with the deceased. Executors are responsible for making sure that all genuine debts are paid out of the assets in the estate. An executor is at fault if the assets of the estate are distributed to the beneficiaries before all the debts of the deceased have been paid.
There is also a statutory order in which debts must be paid. It’s important to pay debts in the right order. Secured debts such as a mortgage must be paid first and then the funeral and administration expenses. If you pay debts that have a lower place in the order of priority before debts with higher priority you could be at fault. If there’s no money left in the estate to pay them, the deceased’s creditors who had higher priority might try to make a claim against your own personal assets.
# 5. Keep Estate Money Separate
Make sure you keep estate money separate from your own. Don’t be tempted to pay sale proceeds of any assets or money released from the deceased’s bank accounts into your own personal account.
You are not legally obliged to open a separate bank account to hold estate money but think about the consequences if you don’t. It could lead to all kinds of confusion and you might even be accused of dishonesty.
# 6. Executor’s Expenses
There are nearly always expenses involved in acting as an executor. You’ll probably have to pay for some things such as postage, registrar’s fees, and travel costs while you are carrying out your duties. Executors are entitled to be reimbursed from the estate for reasonable expenses that can be proved. It’s a good idea to keep all your receipts. You’re not allowed to charge for your time unless the Will specifically gives you the authority to do so, or you’re acting in a professional capacity as executor.
# 7. Interest on Legacies – keep an eye on the calendar!
Legacies i.e. fixed amounts of money mentioned in the deceased’s Will should be paid within 12 months of the death. If that’s not possible the beneficiary is entitled to interest on the legacy amount after 12 months until the date of payment. It’s important not to overlook this point, even if the amount of interest is very small. If a beneficiary asks for the interest later on and there’s no money left in the estate the executors may have to pay the interest themselves.
# 8. Probate Valuations
Executors are responsible for supplying accurate information about the value of the deceased’s assets. HMRC usually accepts estimated values, at least initially. You will need professional valuations for assets where there is likely to be Inheritance tax to pay. In the case of unusual items or where the condition of the item affects its resale value, you might need to obtain several valuations. Land that has development potential should be valued with that in mind because it may be necessary to negotiate with HMRC about the value.
# 9. Check If Any Taxes Are Due
There could be income tax or capital gains tax due from when the deceased was alive. All taxes must be paid from the deceased’s estate before it’s wound up. That might involve selling some estate assets to raise money to pay the tax.
Inheritance tax must be paid within 6 months of the end of the month in which the death occurred. It is the executor’s responsibility to make sure that all unpaid tax is calculated correctly. If the estate is split between beneficiaries who are exempt from Inheritance Tax e.g charities and those who are not, special calculations may have to be done. This is to avoid the tax being paid out of part of the estate due to the exempt beneficiaries.
# 10. Don’t Act Too Hastily
Don’t rush too quickly into selling assets or distributing them to beneficiaries, even if you come under pressure to do so. There may be creditors or other people who could have a claim against the estate. Some assets may be worth more than you think; a rushed sale could be a mistake. Take the time to get professional valuations and do some internet research before making decisions about selling estate assets. You should also do some checks on the beneficiaries – even if you think you know them well. Executors must not transfer money or other assets to bankrupt beneficiaries. You can land yourself in big problems if you do. See our article on bankrupt beneficiaries
Use this How to Administer an Estate Guide – 10 Things Executors Should Know to help you with starting to administer an estate but remember there’s much more to being an executor. Don’t get caught out. You can improve your knowledge and understanding through simple training.
Ask about our Wills and Probate Workshops and online training.