22 August 2017

How (and Why) to Avoid Probate

Probate is the process of sorting out someone's assets when they die - their estate. In some cases their executors need a "Grant of Probate" before they can pass on the assets according to the Will. But this takes time (and form-filling) so if it can be avoided it is worth doing so.

It is possible to apply for probate yourself, but most people use a solicitor or a probate service. If a solicitor or a bank has provided the Will then they may have written themselves in to provide the probate service (often with a hefty charge), so watch out for that.

If there is any Inheritance Tax (IHT) to pay then probate will be necessary. But for smaller estates it is worth avoiding the need for it. Here's some ways to do that:

1. Put assets into trust - a Probate Trust is not difficult and you can still benefit from the assets if IHT is not an issue. That wouldn't work for ISAs, though, since they can only be owned by an individual.

2. Give up your ISA and investments. That sounds drastic, but if your only individually owned asset is an ISA it may be more cost-effective to lose the tax advantage and avoid probate.

3. Give it away or spend it - then it's not yours and you don't have to account for it!

4. Own it jointly - typically with a spouse. Then it just passes over 100% to the other owner. BUT there are other issues with this to think about, like tax. And if one spouse loses mental capacity the joint account could be frozen while the bank confirms that you are entitled to continue to use the account.

5. Pensions and Death in Service Benefits - make sure the trustees know who you want to pass these on to if you die, otherwise it could become part of your estate and trigger a requirement for probate.

6. Ask your bank what their limit is to require probate. Above a certain value across all your accounts - typically in the £5,000 to £15,000 range - the bank or building society will require probate before releasing those funds.

In spite of those tips, what is right for one person is not necessarily the best for someone else, so taking professional advice may be the best thing you can do.

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