Realising Assets & Paying Debts
REALISE THE ASSETS
Once probate has been granted the Executors or Administrators have the power to request that asset holders release funds.
If you have spent time finding all the asset holders by the ways mentioned in ‘Practical Matters’ and ‘Setting up the file’, or we can completed the Probate Application for you, this part of the process should be relatively straightforward.
Some asset holders may make payment via bank transfer, others may send a cheque. Remember if you do not have an account in the deceased’s name you will need to request cheques payable to you personally, usually with an indemnity letter.
PAY THE LIABILITIES
Once probate has been granted the Executors or Administrators should start to receive funds into the Executors Account/nominated personal account.
Once funds start coming in you can start making payments to cover any debts of the deceased. Remember to consider if you are satisfied all debts are due and genuine. See 'Valuing the Estate'.
CREDITORS (WHO THE DECEASED OWED MONEY TO)
Under the Trustees Act 1925 s27 a personal representative may protect themselves from their personal liability to beneficiaries and creditors where they have distributed the estate and there are unpaid debts and liabilities.
Creditors have six years to bring an action for unpaid debts but a personal representative will not want to wait that long before distributing the estate.
Any liability will accrue even if the personal representative was unaware of the unpaid debt or liability at the date of distribution of the estate.
Protection can be achieved by placing an advertisement for creditors in accordance with this Act.
To do this the personal representatives must give notice of their intention to distribute the estate and require any interested party to send them particulars of their claim within a set timescale, which must be no less than two months and a day from publication of the notice. The notice must be placed in:
The London Gazette
A paper local to the deceased's property or place of business and/or residence
The London Gazette is no longer published in paper form, it is now an online resource of legal notices.
This notice may not be necessary in all cases, but where there is doubt as to the completeness of debts, the make-up of a family and whether there might be a later will this would be an advisable step.
It is essential that valuable items are removed from the property as the deceased's name and address are printed.
More information can be found at:
The notice will include details of where any claim should be submitted. Once the notification period has expired any claimant cannot take action against the personal representative but would have to claim payment from the beneficiaries.
If Personal Representatives think all debts have been discovered by the work completed they may chose not to advertise, however you should be aware that if creditors later make themselves known these debts may have to be paid by the Personal Representative themselves.
Alternatively you can part distribute, then advertise, then do a final distribution once the timescale has elapsed. This allows the beneficiaries to receive some funds sooner.
INCOME TAX – AFTER DEATH TO END OF ADMINISTRATION
The estate is liable for tax on:
No personal allowance is available to reduce the amount due. Tax is applied at the basic rate. Contact us for advice if you think tax may be due during the estate administration period.
CAPITAL GAINS TAX
If applicable this is usually deducted at source on investments. If the deceased was a 40% taxpayer an additional amount of tax may be due.
Contact us for advice.
Any Capital Gains Tax prior to death should be recorded on the deceased’s own tax return.
Any Capital Gains Tax post death is a liability of the estate but you do get one year’s annual allowance (£12,300).
If the estate is insolvent get advice before you make any payments to anyone.
Contact us for advice.
MEDALLION GUARANTEE STAMP
Why might I need a Medallion Signature Guarantee?
Tens of thousands of UK investors bought shares in high profile companies such as Cadbury Schweppes, Tyco and IBM, all of which are now listed in the USA.
Often the transfer agent (the US equivalent of our registrar) requires the transfer paperwork to have a Medallion Signature Guarantee attached to it.
Until now, UK personal representatives were required to clear security checks in the US and obtain a Medallion Guarantee Stamp from America, before shares could be legally transferred to a new owner.
What does the Medallion Signature Guarantee do?
Medallion Signature Guarantees are a highly effective way of protecting against liability and fraud. Each stamp has a unique barcode and, if a stamp goes missing, the missing code is registered to ensure it cannot be used fraudulently.
Careful compliance checks are undertaken to help protect the shareholder and their representatives against the risk of fraud.