How a person's estate is composed
Probate – Estates
While most people would be uncomfortable summing a person as just the net worth of all the things they own at any one point in time, they would probably concede that this is the best way to go about the process of probate. In legal jargon a person’s estate is the net worth of all their possessions at any one point in time.
Estates are all of a person’s assets, all of the money they have stashed away, property they live in or own, any investments and all of their entitlements and obligations. The concept of a person’s estate only really comes into importance in the legal realms of bankruptcy and probate. During bankruptcy a person’s estate is taken away while probate is the process whereby the owner of the estate arranges for it to be distributed amongst the living when they die.
The process of probate involves the person named as the executor of the deceased’s Will evaluating the estate, paying any tax or debts that are owed, applying for the right to distribute the estate (the grant of probate) and finally sharing out the estate according to the wishes of the deceased as they were formally expressed in the Will.
The evaluation of the estate is done to determine whether there is any inheritance tax owed. Inheritance tax is owed on any taxable estate, that is all of the deceased’s land, property, money, investments and liabilities. Estates that have an overall value of below £325,000 are exempt from the tax, although the rate for anything above this band is 40%. There are also inheritance tax exemptions for gifts that are made to spouses and civil partners, donations to charities, national institutions or political parties.
The probate process of obtaining the legal right to distribute an estate differs depending on whether or not the owner of the estate has left behind a valid will or not.
If there has been no Will left by the owner of the deceased, there will be no executor named. This means that a close relative will have to apply to administer the estate. This can be done by applying to the Probate Registry for a Grant of the Letters of Administration, which can then be used as proof the right to deal with the estate to banks. If the estate’s value is less then £5,000 there will be no need for a grant.
In a situation where there is no Will, the first line of entitlement to the estate goes to spouses or civil partners, although blood relatives are legally entitled to a share of it as well.
If the owner of the estate has left behind a valid Will, the person named as executor within it must apply to the Probate Registry for the Grant of Probate. This document transfers to them the legal right to carry out the wishes that are formally expressed in the Will.
The estate that a person builds up over the course of a lifetime will have an emotional as well as financial value to the family and friends who are left behind. In this respect it is important to make sure you have a valid Will so that your estate can go to the people you love, not the ones you hate.