28 November 2012

I finally finished winding up my mother's estate. What can you learn from my experience?

Winding up the estate of someone close is never going to be easy, but I decided to do it myself for the experience, and so that I would know what my clients would need in a similar situation.

There was a wide range of things to be done: probate to apply for, Inheritance Tax (IHT) to calculate and pay - including a transferable nil rate band, a trust outside of the estate, a house to sell, and of course Income Tax and pensions to be sorted out, as well as the usual insurance, utilities, savings, investments and bank accounts.
 
The transferable nil rate band is theoretically a big advantage in reducing the Inheritance Tax payable, but it requires comprehensive record keeping going back 7 years before the first death. Fortunately we had all that, but for many people a Will which creates a "Nil Rate Band trust" is a more practical option.
 
The IHT reporting and probate application required around 18 different forms and was not a lot of fun, but online guides are available and the IHT calculation was accepted by HMRC without query. We were even able to reclaim some of the tax when the house sold for less than the probate valuation.
 
Obtaining probate itself was interesting. Swearing an oath is not an everyday experience for me!
So what can you learn from this? Whether you do everything yourself or employ a professional, there are two main tips I can give:

Be prepared - think ahead

Fristly, having a realistic assessment of IHT liability is essential to the planning process.
 
From that you can work out how you are going to pay any IHT. Having money held in trust outside of the estate was a big advantage (fortunately my mother took my financial planning advice!) since it enabled IHT to be paid and probate to be granted sooner than it might otherwise have done.

... and of course it is absolutely vital to have an up to date Will and preferable a Power of Attorney as well.

Keep records

If you are thinking of claiming a transferable nil rate band from the first spouse to die then you will need records of gifts for the 7 years prior to that.
 
And of course the details of all savings, investments, etc. will be needed so get organised!
 
Would I do it again? Probably not. It was a great deal cheaper than employing a solicitor,  but time consuming. A middle way would be to use a probate service offering a fixed price - we can now offer that to our clients, so it must be good!

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