A Simple Guide to Probate Loans for Executors and Administrators

When a person dies somebody needs to take responsibility for sorting out all their affairs. This begins with making arrangements for a funeral and ultimately ends with attending to the distribution of all their assets (their Estate).

If the deceased individual had been organised, they would have made a will. This document takes effect on death and not only appoints one or more people to administer the Estate, but also directs them as to how the Estate is to be distributed. An individual appointed under the will is known as the Executor.

Where there is no will, or for whatever reason, the executor is unable to carry out all of their duties, someone may apply to the probate registry to attend to the executor’s duties. Such a person, if their appointment is confirmed, is known as an Administrator. Once appointed, the duties of the Executor and Administrator are the same.

One of the Executor’s first tasks will be to establish all of the assets of the deceased and their value as at the date of death. Once they have done so, they must calculate the Inheritance Tax payable, if any. If there is tax to pay, this must be settled with HM Revenue and Customs before a grant of Probate (or in the case of an Administrator, Letters of Administration) will be granted. Until such time as the Grant has been obtained it is not possible for the Executor to call in or deal with the assets.

This begs the question as to how the tax is going to be financed. Very often clearing banks will pay funds direct to HMRC on the Executors behalf for the purpose of settling Inheritance Tax, and stockbrokers may do likewise if they have a portfolio under management. If those options are not available, a probate loan may be required to enable the grant to be obtained. Our partner has specialist knowledge in this regard and will be prepared to consider making a loan available promptly and with minimum fuss. This usually involves very short-term finance.

Once the Grant of Probate has been obtained, Executors can call in assets prior to distribution to beneficiaries of the Estate, or alternatively assets can be sold and converted to cash which can facilitate distribution, or help to meet costs and expenses. But what if the Executor wishes to retain an asset for a while, or improve it, so as to gain an enhanced value on the open market for the benefit of the beneficiaries? If the cash is not available within the Estate how can funds be raised? Again, our partner is a specialist in this area and will be pleased to discuss any specific requirements.

The cost of such borrowing will very much depend on circumstances and the extent to which security for the loan is provided and the cost of the finance is an expense of the Estate.

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Our specialist partners can advise on all of the legal aspects of estate planning, including Will trust planning, powers of attorney, trust administration, the creation of lifetime trusts and deeds of variation, and respective post-death inheritance tax planning. These essential services form the solid foundations for all estate and succession planning, and are critical elements to leaving a lasting legacy.

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We work with carefully selected partner organisations to provide a collaborative, multi-disciplinary approach to estate planning. To strengthen and develop the estate planning element of a business, view our other Partner Services.

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