What do do with relative's share portfolio following death

[Longtermyieldman]

My view may be a little unconventional about the need for probate, but I have always held the view that probate exists not to benefit the estate, family, next of kin, executor or beneficiaries. But rather it exists to benefit creditors of the deceased, most obviously the tax man, but others as well. It is in fact a pain in the backside for the family of the deceased and, as such, I'd always try and avoid it if I could. You can pay off creditors and the taxman yourself at the right moment, if needed.

So for example if the only asset was a brokerage account then I might be tempted to both sell of the holdings and also maybe transfer the funds to myself. Then there wouldn't even be a need to notify the broker about the death. And as executor I might probably not need probate at all. As long as I am confident about the Will I can distribute at my discretion. It may even be that I am the sole beneficiary and so then the matter is done.

I just wouldn't spend or distribute or even touch that money until a reasonable period of time has passed and I was 100% certain everything was kosher.

Is this legal? Who determines when probate is required? I suppose on her death I could sell all the shares, transfer out all the cash to her bank account, distribute it to the beneficiaries and only then notify the platform and bank, but there would be IHT to pay, I think about £100k.

[scrumpyjack]

My view may be a little unconventional about the need for probate, but I have always held the view that probate exists not to benefit the estate, family, next of kin, executor or beneficiaries. But rather it exists to benefit creditors of the deceased, most obviously the tax man, but others as well. It is in fact a pain in the backside for the family of the deceased and, as such, I'd always try and avoid it if I could. You can pay off creditors and the taxman yourself at the right moment, if needed.

So for example if the only asset was a brokerage account then I might be tempted to both sell of the holdings and also maybe transfer the funds to myself. Then there wouldn't even be a need to notify the broker about the death. And as executor I might probably not need probate at all. As long as I am confident about the Will I can distribute at my discretion. It may even be that I am the sole beneficiary and so then the matter is done.

I just wouldn't spend or distribute or even touch that money until a reasonable period of time has passed and I was 100% certain everything was kosher.

Is this legal? Who determines when probate is required? I suppose on her death I could sell all the shares, transfer out all the cash to her bank account, distribute it to the beneficiaries and only then notify the platform and bank, but there would be IHT to pay, I think about £100k.

You have to fill out the IHT forms and pay the IHT before probate anyway. If the assets were accessible to you, I can't see why you couldn't do this but you are exposed in the event anyone challenges the Will or makes any other disputed claim on the estate. If the estate held property I don't think you could transfer title without probate.

[Lootman]

My view may be a little unconventional about the need for probate, but I have always held the view that probate exists not to benefit the estate, family, next of kin, executor or beneficiaries. But rather it exists to benefit creditors of the deceased, most obviously the tax man, but others as well. It is in fact a pain in the backside for the family of the deceased and, as such, I'd always try and avoid it if I could. You can pay off creditors and the taxman yourself at the right moment, if needed.

So for example if the only asset was a brokerage account then I might be tempted to both sell of the holdings and also maybe transfer the funds to myself. Then there wouldn't even be a need to notify the broker about the death. And as executor I might probably not need probate at all. As long as I am confident about the Will I can distribute at my discretion. It may even be that I am the sole beneficiary and so then the matter is done.

I just wouldn't spend or distribute or even touch that money until a reasonable period of time has passed and I was 100% certain everything was kosher.

Is this legal? Who determines when probate is required? I suppose on her death I could sell all the shares, transfer out all the cash to her bank account, distribute it to the beneficiaries and only then notify the platform and bank, but there would be IHT to pay, I think about £100k.

Yes, it is legal.

Usually nobody makes a determination that probate is needed and imposes that upon you. Rather an institution blocks an account, or a property needs to be sold, and then you have no choice but to apply for it. Otherwise the beneficiaries don't get their entitlement.

But if you imagine a case where the Executor had access to all the assets or already had custody of those assets, then why would probate be needed? A diligent Executor can determine the IHT due and pay it. He can distribute the assets according to the terms of the Will. And pay off any creditors before that. Not only is that legal but I'd argue it is desirable.

The probate process is more like a rubber stamp. Now, that said, there might be cases where as an Executor I'd want that. Perhaps I anticipate a dispute and I want cover for my actions. Showing that probate was approved provides that. And the probate office might catch a mistake I make that otherwise might have exposed me to a liability, e.g. a witness to the Will was also a beneficiary.

I'm not saying anyone should take risks in a desperate tactic to avoid probate. But at the margin and if it is even feasible, then I would rather maintain control myself and not suffer the delays, costs and hassles of the probate process.

[PinkDalek]

Is this legal? Who determines when probate is required? I suppose on her death I could sell all the shares, transfer out all the cash to her bank account, distribute it to the beneficiaries and only then notify the platform and bank, but there would be IHT to pay, I think about £100k.

Usually nobody makes a determination that probate is needed and imposes that upon you. ...

But if you imagine a case where the Executor had access to all the assets or already had custody of those assets, then why would probate be needed? A diligent Executor can determine the IHT due and pay it. He can distribute the assets according to the terms of the Will. And pay off any creditors before that. Not only is that legal but I'd argue it is desirable.

The probate process is more like a rubber stamp. ...

Have a look at:

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/730319/IHT400_Notes_0618_online.pdf

Inheritance Tax reference number

If there is any Inheritance Tax to pay, you will need an Inheritance Tax reference number before you send the form IHT400 to us. You can apply for a reference number online at http://www.gov.uk/paying-inheritance-tax or by filling in Schedule IHT422, ‘Application for an Inheritance Tax reference’ and sending it to the address shown on that form. You will need to apply for a reference number at least 3 weeks before you plan to send us this form. You do not need to apply for a reference or complete this box if there is no tax to pay.

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/622654/IHT422.pdf

Then see:

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/797134/IHT421_04.pdf

About this form

Fill in this form if you’re applying for a grant of representation in England, Wales or Northern Ireland.

How do you propose the Executors obtain IHT clearance without obtaining the Grant?

So for example if the only asset was a brokerage account then I might be tempted to both sell of the holdings and also maybe transfer the funds to myself.

If that includes the funds in the ISA, they'll lose the benefits I've already pointed out here:

When an investor dies on or after 6 April 2018 https://www.gov.uk/guidance/close-void-or-repair-an-isa-if-youre-an-isa-manager#death-investor.

I'm not convinced Longtermyieldman is reading all the replies, so I'll leave it there for the moment.

[Lootman]

How do you propose the Executors obtain IHT clearance without obtaining the Grant?

I will be the first to admit that I have not done that.

But consider an example. Suppose I give away a million pounds to my children, then drop dead. I have no money or assets left, and so it is a near certainty that nobody will initiate probate. But IHT will be due, to be reclaimed from my children.

Presumably HMRC goes after my kids. They can be forced to hand over the tax but I do not believe that they can be forced to go through probate. Being an executor is essentially a voluntary act. Executors can renounce.

Now, maybe HMRC can sponsor probate themselves if it is really necessary, and bill the beneficiaries. But surely a determination of tax due can be done without that?

I can imagine other examples where probate cannot be imposed, e.g. all the parties and assets are overseas. I feel sure that HMRC is flexible about exactly how they collect, as long as they do collect.

[PinkDalek]

Is this legal? Who determines when probate is required?

Replying to you directly.

See https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/837119/pa1p-eng.pdf which includes:

PA1P — Probate application This form is for an application where the person who has died left a will ...

Inheritance Tax Summary Form: Please submit the appropriate form (IHT205 or IHT207, and IHT217 if applicable), signed by all applicants

You may have to fill in IHT400, as against those forms referenced above, but the evidence is clear, You will not get IHT clearance from HMRC if you don't apply for "Probate".

[PinkDalek]

How do you propose the Executors obtain IHT clearance without obtaining the Grant?

I will be the first to admit that I have not done that. ...

Enough said and I've seen your many scenarios before. I'll not continue this aspect of the discussion, as it is pointless and takes the OP no further forward.

[Lootman]

You will not get IHT clearance from HMRC if you don't apply for "Probate".

Which begs an obvious question.

If, as an Executor, I already have the assets of the deceased, then why do I want or need "IHT Clearance"?

The main reason to need that is to get the Grant so that institutions will release the assets. But if I already have those assets . .

Now of course I need to pay the tax due. But I can compute that myself and send them the money. Why would HMRC not be happy with that? They may not even have any choice about it.

[PinkDalek]

[but probably doesn't do the opposite if there are losses (IHT being calculated on valuation at death) ...

See the IHT form linked below Claim for relief – loss on sale of shares and note the conditions re 12 months and all or nothing etc, not just those sold at a loss:

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/373491/IHT35.pdf

[Longtermyieldman]

Many thanks everyone for the inputs. It seems there are differing views about whether probate is required. The only beneficiaries are the two executors and one other close family member who will be comfortable with what we do. However I've now phoned Hargreaves Lansdown and it seems their terms and conditions require customers using a LPA to manage another's account to notify them immediately on death so I could be in difficulties if I sold everything then told them. Also the only way to avoid probate would be to withdraw the proceeds from HL, move them to my grandmother's bank account then distribute them before notifying the bank, all of which feels like an attempt to evade notification. On the positive side it looks like HL allows executors to 'sell all', albeit once a death certificate has been provided and other hoops jumped through, and even then only by filling in a form. This time lapse means CGT and income tax hoops could still be created to jump through, but I don't see a way round it.

[Chrysalis]

Probate either will or will not be required, whatever people’s ‘differing views’ on the matter! The views that count are the organisations involved, and also, I believe, if there is property to dispose of. With the amount involved, I think it seems highly likely. It is good that HL will allow sale of the assets without probate, that gives you a lot of flexibility over timing. Did you ask HL whether they require probate to allow the proceeds to be paid out of the account? I don’t see how you could distribute funds from your grandmothers bank account after death, as again, any LPA will have ceased and with it any power to access the account.

[Lootman]

Probate either will or will not be required, whatever people’s ‘differing views’ on the matter! The views that count are the organisations involved, and also, I believe, if there is property to dispose of. With the amount involved,

The question that Longtermyieldman asked remains unanswered though i.e. exactly WHO would determine and decide that probate is needed? (And moreover how would they enforce that?)

In most cases the family/executors themselves decide that they need probate in order to get hold of the assets. But in a case where they already have the assets then surely it becomes an optional activity. As long as the assets are distrbuted according to the Will, after any taxes and debts have been paid, it would seem that probate is redundant. The Executor has everything he needs to complete his task.

I think it seems highly likely. It is good that HL will allow sale of the assets without probate, that gives you a lot of flexibility over timing. Did you ask HL whether they require probate to allow the proceeds to be paid out of the account? I don’t see how you could distribute funds from your grandmothers bank account after death, as again, any LPA will have ceased and with it any power to access the account.

The solution would be to not only sell the shares but also to transfer the resultant funds to the Executor post-death. The power exists to do that as an Executor, but it would require knowledge of the PIN or password, as discussed before. The LPA can no longer be used.

Once the transfer is complete there would be no need to inform HL anyway as the account has ceased to exist.

An important thing to note here, however, is that by selling shares or transferring cash, the Executor has already started his process and so he cannot later decline to act. He nas meddled in the estate and is personally on the hook for any liabilities. If there is any reason to suspect that there will be problems or conflicts down the road, it will be too late to renounce. Although again that comes back to LTYM's question - WHO would enforce that?

The other question I'd have, if that route was taken, is how the Executor corresponds with HMRC to determine the tax due IF there is no probate process? It is the probate process that usually does that. Presumably there would be some back-and-forth correspondence. I'd expect HMRC to be co-operative because someone is volunteering to pay tax when HMRC might not otherwise have known it was due.

[supremetwo]

Probate either will or will not be required, whatever people’s ‘differing views’ on the matter! The views that count are the organisations involved, and also, I believe, if there is property to dispose of. With the amount involved,

The question that Longtermyieldman asked remains unanswered though i.e. exactly WHO would determine and decide that probate is needed? (And moreover how would they enforce that?)

In most cases the family/executors themselves decide that they need probate in order to get hold of the assets. But in a case where they already have the assets then surely it becomes an optional activity. As long as the assets are distrbuted according to the Will, after any taxes and debts have been paid, it would seem that probate is redundant. The Executor has everything he needs to complete his task.

I think it seems highly likely. It is good that HL will allow sale of the assets without probate, that gives you a lot of flexibility over timing. Did you ask HL whether they require probate to allow the proceeds to be paid out of the account? I don’t see how you could distribute funds from your grandmothers bank account after death, as again, any LPA will have ceased and with it any power to access the account.

The solution would be to not only sell the shares but also to transfer the resultant funds to the Executor post-death. The power exists to do that as an Executor, but it would require knowledge of the PIN or password, as discussed before. The LPA can no longer be used.

Once the transfer is complete there would be no need to inform HL anyway as the account has ceased to exist.

An important thing to note here, however, is that by selling shares or transferring cash, the Executor has already started his process and so he cannot later decline to act. He nas meddled in the estate and is personally on the hook for any liabilities. If there is any reason to suspect that there will be problems or conflicts down the road, it will be too late to renounce. Although again that comes back to LTYM's question - WHO would enforce that?

The other question I'd have, if that route was taken, is how the Executor corresponds with HMRC to determine the tax due IF there is no probate process? It is the probate process that usually does that. Presumably there would be some back-and-forth correspondence. I'd expect HMRC to be co-operative because someone is volunteering to pay tax when HMRC might not otherwise have known it was due.

Unless it is a low value or an exempt estate, HMRC will have to be informed and probate will be required and that will be determination responsibility of the executor.

There is a list of conditions for low value and exemption here (pdf file):-
https://assets.publishing.service.gov.u ... online.pdf

Example pages 2 and 3.
Exempt estates
These are estates where there can be no liability to Inheritance Tax because the gross value of the estate does not exceed £1 million and there is no tax to pay because one or both of the following exemptions apply:

• Spouse or Civil Partner Exemption
• Charity Exemption
No other exemption or relief can be taken into account.

The conditions for these estates are that:
• the deceased and the deceased’s spouse or civil partner have always been domiciled in the UK
• the gross value of the estate does not exceed £1 million and the net chargeable value of the estate after deduction of liabilities and
Spouse or Civil Partner Exemption and/or Charity Exemption only does not exceed the Inheritance Tax threshold
• if the estate includes any assets in trust, they are held in a single trust and the gross value does not exceed £150,000 (unless the settled
property passes to a spouse or civil partner, or to a charity, in which case the limit is waived)
• if the estate includes foreign assets, their gross value does not exceed £100,000
• if there are any specified transfers, their chargeable value does not exceed £150,000, and the deceased had not made a gift with reservation of benefit
• gifts out of income of more than £3,000 in any year must be shown in full
• no charge arises on the individual’s death under any of the provisions relating to alternatively secured pensions

[scrumpyjack]

Probate either will or will not be required, whatever people’s ‘differing views’ on the matter! The views that count are the organisations involved, and also, I believe, if there is property to dispose of. With the amount involved,

The question that Longtermyieldman asked remains unanswered though i.e. exactly WHO would determine and decide that probate is needed? (And moreover how would they enforce that?)

In most cases the family/executors themselves decide that they need probate in order to get hold of the assets. But in a case where they already have the assets then surely it becomes an optional activity. As long as the assets are distrbuted according to the Will, after any taxes and debts have been paid, it would seem that probate is redundant. The Executor has everything he needs to complete his task.

I think it seems highly likely. It is good that HL will allow sale of the assets without probate, that gives you a lot of flexibility over timing. Did you ask HL whether they require probate to allow the proceeds to be paid out of the account? I don’t see how you could distribute funds from your grandmothers bank account after death, as again, any LPA will have ceased and with it any power to access the account.

The solution would be to not only sell the shares but also to transfer the resultant funds to the Executor post-death. The power exists to do that as an Executor, but it would require knowledge of the PIN or password, as discussed before. The LPA can no longer be used.

Once the transfer is complete there would be no need to inform HL anyway as the account has ceased to exist.

An important thing to note here, however, is that by selling shares or transferring cash, the Executor has already started his process and so he cannot later decline to act. He nas meddled in the estate and is personally on the hook for any liabilities. If there is any reason to suspect that there will be problems or conflicts down the road, it will be too late to renounce. Although again that comes back to LTYM's question - WHO would enforce that?

The other question I'd have, if that route was taken, is how the Executor corresponds with HMRC to determine the tax due IF there is no probate process? It is the probate process that usually does that. Presumably there would be some back-and-forth correspondence. I'd expect HMRC to be co-operative because someone is volunteering to pay tax when HMRC might not otherwise have known it was due.

Unless it is a low value or an exempt estate, HMRC will have to be informed and probate will be required and that will be determination responsibility of the executor.

There is a list of conditions for low value and exemption here (pdf file):-
https://assets.publishing.service.gov.u ... online.pdf

Example pages 2 and 3.
Exempt estates
These are estates where there can be no liability to Inheritance Tax because the gross value of the estate does not exceed £1 million and there is no tax to pay because one or both of the following exemptions apply:

• Spouse or Civil Partner Exemption
• Charity Exemption
No other exemption or relief can be taken into account.

The conditions for these estates are that:
• the deceased and the deceased’s spouse or civil partner have always been domiciled in the UK
• the gross value of the estate does not exceed £1 million and the net chargeable value of the estate after deduction of liabilities and
Spouse or Civil Partner Exemption and/or Charity Exemption only does not exceed the Inheritance Tax threshold
• if the estate includes any assets in trust, they are held in a single trust and the gross value does not exceed £150,000 (unless the settled
property passes to a spouse or civil partner, or to a charity, in which case the limit is waived)
• if the estate includes foreign assets, their gross value does not exceed £100,000
• if there are any specified transfers, their chargeable value does not exceed £150,000, and the deceased had not made a gift with reservation of benefit
• gifts out of income of more than £3,000 in any year must be shown in full
• no charge arises on the individual’s death under any of the provisions relating to alternatively secured pensions

I think you are confusing two separate issues:-
- a need to inform HMRC, complete an IHT return and pay IHT and
- the need to obtain probate.

As far as I am aware there is no LEGAL requirement to obtain probate. It may be a practical requirement in order to obtain control of assets but that is not the same as saying there is a law that you must obtain probate. The IHT notes you gave a link to only referred to probate as something that may be needed to get hold of the assets, not that there is a law you are breaking if you don't obtain it.

Dealings with the capital taxes office and IHT have to be done with BEFORE probate anyway, so they will not have any interest in your subsequent application, or non application for probate.

[Lootman]

Unless it is a low value or an exempt estate, HMRC will have to be informed and probate will be required and that will be determination responsibility of the executor.

Certainly if no IHT is due then HMRC would have no reason to be involved and so the Executor would be free to proceed without going through the formal probate process. Effectively it would be a do-it-yourself probate. As long as it is done right, there is no problem.

In this case the estate is about £600,000 and, assuming a nil-rate band of £325,000, then on the face of it £275,000 is taxable at 40%, meaning a £110,000 tax liability (excluding any income tax return that might be needed).

The question then arises as to what HMRC would do, if anything, if the Executor simply sent £110,000 to HMRC with a written explanation, paid off any other debts, and distributed the balance to the beneficiaries, all without the Grant?

Are you suggesting that HMRC would make the Executor then go through the pointless process of formal application to the Probate Office, just to get exactly the same outcome? Or would they, after doing whatever due diligence they deem relevant, simply take the money and leave it at that?

Whilst they might technically be within their rights to insist on the former, in practice it seems like a big waste of everyone's time and effort. It would be punishing a diligent and honest Executor, whilst deflecting scrutiny from other dishonest Executors who would just keep quiet about it all and hope that nobody notices.

[PinkDalek]

[Dealings with the capital taxes office and IHT have to be done with BEFORE probate anyway, so they will not have any interest in your subsequent application, or non application for probate.

How does that fit in with the information I provided here viewtopic.php?p=276260#p276260 and here viewtopic.php?p=276264#p276264?

[scrumpyjack]

[Dealings with the capital taxes office and IHT have to be done with BEFORE probate anyway, so they will not have any interest in your subsequent application, or non application for probate.

How does that fit in with the information I provided here viewtopic.php?p=276260#p276260 and here viewtopic.php?p=276264#p276264?

What law says the executor has to obtain an IHT clearance certificate?

[PinkDalek]

What law says the executor has to obtain an IHT clearance certificate?

I never said there was one. The precise wording was:

You will not get IHT clearance from HMRC if you don't apply for "Probate".

I may be wrong but, as an executor a couple of times, involving complex valuation issues etc, I most certainly didn't wish to distribute without such a clearance.

That also wasn't the only point I raised.

[scrumpyjack]

What law says the executor has to obtain an IHT clearance certificate?

I never said there was one. The precise wording was:

You will not get IHT clearance from HMRC if you don't apply for "Probate".

I may be wrong but, as an executor a couple of times, involving complex valuation issues etc, I most certainly didn't wish to distribute without such a clearance.

That also wasn't the only point I raised.

Hi PD, yes I quite take your point and having been an executor myself several times, it certainly would not have been possible to act without probate nor would I have wanted to be exposed to argumentative relatives' complaints by not going through all the normal procedures. Still good luck to anyone who does go the non probate route, which I think is possible in some circumstances if the executor is willing not to have the legal protections that go with the probate process. If HMG try to reintroduce the £6,000 (initially £20,000) max probate fee, some may feel it is worth organising their affairs so that their intrepid executor may seek legally to avoid it.

[Lootman]

What law says the executor has to obtain an IHT clearance certificate?

I never said there was one. The precise wording was:

You will not get IHT clearance from HMRC if you don't apply for "Probate".

I may be wrong but, as an executor a couple of times, involving complex valuation issues etc, I most certainly didn't wish to distribute without such a clearance.

That also wasn't the only point I raised.

Hi PD, yes I quite take your point and having been an executor myself several times, it certainly would not have been possible to act without probate nor would I have wanted to be exposed to argumentative relatives' complaints by not going through all the normal procedures. Still good luck to anyone who does go the non probate route, which I think is possible in some circumstances if the executor is willing not to have the legal protections that go with the probate process. If HMG try to reintroduce the £6,000 (initially £20,000) max probate fee, some may feel it is worth organising their affairs so that their intrepid executor may seek legally to avoid it.

Yes, like you I also thought that PD was originally saying that it was legally impossible to proceed with a DIY probate without this HMRC signoff. It turns out that it is more a matter of risk assessment on the part of the Executor. Some Executors are more cautious and others more aggressive.

Either way HMRC relies heavily on the valuation and computations done by the Executor anyway. It is not as if HMRC has the data to do otherwise, without a full investigation anyway. So in practice if a diligent Executor does a good job, HMRC will rubber stamp it nearly all of the time.

Like both of you I have been an Executor more than once. I have never waited for this signoff and would be comfortable acting in the suggested manner. Indeed my own estate planning includes such an approach.