The Administration of an estate (sometimes referred to as “Probate”) is the process of taking control of the assets of someone who has died, settling their liabilities and taxes and distributing the estate to those entitled to it.
Following a death the deceased’s assets are frozen and it is not simply the “next of kin” who can unlock them. It is the Personal Representatives (Executors if appointed under a will, Administrators if not, and in both cases PRs for short).
The Grant of Probate (or of Letters of Administration where there is no will) is the document which gives reassurance to the holders of the assets that they are safe to act on the instructions of those whose names appear on it. It is a document issued by the Court (usually following a simple paper application) which not only identifies the PRs, but also confirms that the Will put forward to the Court is the last Will and that it is valid – i.e. that all are safe to administer the estate on the basis of that Will.
The administration of an estate generally falls into two parts – the first is the work leading up to the application for the Grant – “obtaining Probate” – the second the process of collecting in the assets, paying liabilities and taxes, and distributing what is left – “administering the estate”.
In many cases inheritance tax will be payable. The collection of the tax is tied up with obtaining the Grant. Part of the tax has to be paid before the Court will issue the Grant. There is something of a chicken and egg situation here – until you have a Grant you can’t access the assets of the deceased to raise the tax, and until you can raise the tax you cannot obtain the grant! Fortunately there are in most cases ways around this.
So the first step is to identify all that the deceased owned, and owed, and value it all. That value is what is used for calculating the inheritance tax. The tax is raised and the Grant obtained. The Grant is then distributed to the various holders of the assets with appropriate instructions from the PRs, usually to sell assets and collect the cash centrally (although assets can also be transferred to beneficiaries– and often are) and from that central fund the PRs pay the deceased’s bills and other liabilities, and gifts of fixed amounts and particular items. What is left is called the Residue and is distributed between those to whom the deceased left it. Residue is usually the lion’s share of the estate, although by its very nature is of an uncertain amount only determinable on conclusion of the administration.