Business Lasting Power of Attorney and Probate

Business owners should plan for the future with a business Lasting Power of Attorney and consideration of the probate situation in respect of their enterprise.

A Lasting Power of Attorney (LPA) is a document that gives legal authority to a nominated attorney to act on your behalf, should you ever be unable to manage your own affairs.

If you were ever to become unable to deal with business matters yourself, for example through accident, illness or incapacity, then it might mean that your organisation could not be run efficiently. For instance, if no-one is able to access bank accounts, then it may be impossible to pay salaries or purchase stock.

Your family or business partners would need to apply to the Court of Protection to have a deputy appointed, which could be complex and time-consuming, meaning that your business interests could be damaged in the interim.

There is also the risk that the court will not appoint the person whom you would have liked to act on your behalf.

Making a business Lasting Power of Attorney

Buy putting a business LPA in place, you can choose the right person to deal with affairs on your behalf. In the event that you were to be incapacitated, this could be used straight away, meaning that business could continue uninterrupted.

It is also possible to tailor an LPA so that it can be used for particular transactions, for example, in the event that you were out of the country for a period.

Choosing a business attorney You should choose someone who you trust implicitly but whom you also believe has the knowledge and understanding to step in and manage your business affairs if needed. It is advisable to discuss the situation with them beforehand to ensure that they are willing and able to act.

This should be done as part of your business risk management strategy, to ensure that if a problem arose, your operation could carry on as seamlessly as possible.

Probate and estate administration

When someone dies leaving an operational business, decisions will often have to be made immediately. Depending on the way the business is structured and the contingency plans that are in place, someone else involved in the business will usually be able to step in to run the organisation.

Business assets form part of an estate in the same way that other assets do. Where the deceased was a sole trader, their business would usually be sold or wound up.

Where the business is run by a partnership, the partnership agreement may set out the agreed procedure to be followed in the event of a death.

If the deceased was a company director, then their shares in the company will be dealt with in accordance with the terms of their Will. There may also be an agreement in place requiring first refusal on the sale of shares to be given to other directors.

Making plans for future eventualities is part of good business practice. By putting a Lasting Power of Attorney in place and ensuring that your Will adequately deals with your business interests, you can ensure that your enterprise can keep running smoothly whatever happens.

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When someone dies: a step by step guide to administration

When someone dies, the administration can seem overwhelming at what is a very difficult time. We take a look at each step to be taken.

Following a death, dealing with all of the necessary paperwork is an onerous task. If a Will is left, it will appoint an executor who will be responsible for carrying out most of the work, or they can engage a probate solicitor to do this on their behalf.

Register the death

A family member or the executor can register the death at the local Register Office. This should be done within five days of the death. The government should then be notified, which can be done using the Tell Us Once service, so that most government departments will be notified in one go.

Find the Will

If there is a Will, this should be located. It may be stored with the deceased’s solicitor or bank. There will usually be a letter of receipt indicating where it is with the deceased’s papers.

If there is no Will, then someone who is entitled to inherit can apply to be the estate administrator.

Make funeral arrangements

The Will may include details of what sort of funeral the deceased would have liked. Family members will generally arrange this, with the first step being to contact a funeral director, who will guide everyone through the process.

Value the estate The deceased’s personal representative, either their executor if they left a Will or their administrator if they did not, will need to locate all of the deceased’s assets and obtain a value for them, as at the date of death. They will also need to establish what debts and other liabilities exist and what income the deceased was being paid.

Pay Inheritance Tax

Once it has been established how much the deceased’s net estate is worth, Inheritance Tax should be calculated and paid.

Apply for a Grant of Representation

Many estates require a Grant of Representation to enable them to be administered, although a small estate without any property might not require this.

If there is a Will, the executor should apply to the Probate Registry for a Grant of Probate. If there was no Will, the administrator will need to apply for a Grant of Letters of Administration. This document gives the personal representative the legal authority to collect in and sell the deceased’s assets.

Estate administration

Once the Grant of Probate or Letters of Administration is received, the estate can be wound up. This involves collecting in and selling or transferring the deceased’s assets, to include clearing and selling property, paying the deceased’s debts, closing accounts, preparing estate accounts and distributing the estate in accordance with either the Will, if there is one, or the Rules of Intestacy if there is not.

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What should you do if a beneficiary cannot be located?

The job of the executor or administrator of an estate includes distributing assets to the beneficiaries. When a beneficiary cannot be found, it can cause complications.

After someone dies, their estate will be wound up by their personal representative. If they have left a Will, this will name an executor to carry out this job. If they did not leave a Will, then someone who is entitled to inherit from the estate can apply to become the estate administrator.

The personal representative is tasked with collecting in and valuing assets, discharging any debts, preparing estate accounts and distributing the estate to the beneficiaries. If the deceased made a Will, the beneficiaries will be named in this. If there wasn’t a Will, then the estate will be distributed in accordance with the Rules of Intestacy, which specify will inherit.

The personal representative is liable for ensuring that each beneficiary receives what they are due from the estate. If there are any mistakes made, then the personal representative could potentially be held personally liable for any losses that arise.

Finding a missing beneficiary

Every effort should be made to trace beneficiaries. You can make enquiries among the deceased’s friends and relatives and if this does not help, there is the option of instructing a specialist probate tracing company to try and locate missing family members.

You should also place a notice in the local paper nearest to where the deceased last lived. This is known as a section 27 (Trustees Act 1925) notice and will give a potential beneficiary two months in which to make a claim on the estate. While this does not necessarily absolve the personal representative of all personal liability, it can help to show that they have made every effort to trace all beneficiaries.

When a beneficiary cannot be found

Care must be taken in respect of the monies owed to a missing beneficiary to ensure that the administrator or executor does not end up with personal liability for paying this.

The money can be placed in a reserve fund and kept there for the missing beneficiary. The rest of the estate can then also be distributed to any other beneficiaries.

Alternatively, it is possible to purchase an insurance policy that will cover the payout in the event that the missing beneficiary ever comes forward.

All the money can be distributed to the available beneficiaries in return for them signing an indemnity agreeing to return the share that should have gone to the missing beneficiary, should they ever appear. This could be problematic for a personal representative if the beneficiaries do not have sufficient funds if and when a claim is made.

The final option is to apply to the court for an order permitting the estate to be distributed to the known beneficiaries. This is known as a Benjamin Order and is made when the court presumes the beneficiary has died. Evidence of attempts to trace them will need to be provided. Should the beneficiary later appear, the personal representative will be protected from a claim against them by the existence of the order.

As a personal representative, if you are unable to trace a beneficiary, it is recommended that you seek legal advice to ensure that you have done everything possible to protect yourself from liability.

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What expenses can the Executor of a Will claim?

The person named in a Will as the executor is responsible for the winding up of the estate when someone dies. The role can be onerous and time-consuming as well as involve numerous expenses.

Dealing with the administration of an estate can be complex. An executor cannot claim for the time they have incurred; however they are entitled to be reimbursed for the reasonable costs of the administration.

The role of an executor

The executor is tasked with finalising all administrative matters, to include collecting in and valuing assets, accounting for tax, preparing estate accounts and distributing the estate to the named beneficiaries.

The job can take many months and involve extensive paperwork, particularly when an estate is sizeable or complicated. If there is a property to be sold, this can be particularly time-consuming as it will need to be cleared and marketed.

Reasonable probate expenses

Executors may claim reasonable expenses from the estate funds. There is no exact definition of what a reasonable expense is, but an expense that arises from properly carrying out the estate administration would usually be allowed. This generally includes the following:

  • Funeral expenses
  • Probate Registry fees
  • Professional fees, such as a solicitor’s, surveyor’s, or valuer’s costs
  • Estate agency and other fees in respect of the sale of any property
  • House clearance
  • Property insurance
  • Maintenance costs, such as gardening or cleaning
  • Other reasonable expenses such as substantial travel or postage costs

The estate will also pay all debts owed by the deceased, such as Income or Inheritance Tax and utility bills.

Who is entitled to see estate accounts?

Once the executor has finalised the estate accounts, the residuary beneficiaries are entitled to see these. They may challenge any expenses they feel are not reasonable, so it is important to keep a breakdown of the expenses that are claimed as they are incurred.

The executor is required by law to act in the best interests of the estate and its beneficiaries. Failure to do so could potentially result in personal liability for any loss, including losses that arise from errors in the administration, even where the mistakes were genuine.

Professional help

For executors who do not have the time to administer an estate or who are concerned about the level of liability they will be required to take on, they can seek professional help from an experienced probate lawyer who will be able to deal with the administration on their behalf. Reasonable administrative expenses in respect of this representation can be claimed from an estate.

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The drawbacks to being a private executor

An executor, appointed in a Will to finalise someone’s affairs after their death, can be either a professional or a private individual.

According to a survey conducted by market research consultancy IRN entitled UK Wills, Probate and Trusts Market 2020, the number of private executors has increased over the past decade. Despite this, the majority of estate administrations are still dealt with by solicitors, with the following split for the two years prior to the report:

2018  Private individuals: 37.2%       Solicitors: 62.8%

2019  Private individuals: 38.3%       Solicitors: 61.7%

The reason for this is likely to be the complexity of the job as well as the number of hours of work it requires.

The job of executor

It is the executor’s job to wind up all of the deceased’s affairs and account to the beneficiaries named in the Will for their share of the estate. The process involves identifying and valuing all of the assets in the estate, calculating and paying Inheritance Tax, applying to the Probate Registry for a Grant of Probate, collecting and selling the assets, to include any property, preparing estate accounts and distributing the estate to the beneficiaries.

Difficulties to look out for

Even a relatively small estate can be quite time-consuming to administer and involve substantial paperwork. Calculating Inheritance Tax is not always easy, as gifts made in the past seven years may attract tax on a sliding scale and these will need to be identified by scrutinising financial records. Research has found that for many of those who take on the job of executor, the role is more complicated than anticipated. In addition, only a small proportion of private executors have been found to be aware that an executor can be held personally liable for any mistakes that cause losses to the estate, even if these were genuine errors.

Losses could arise by not acting promptly in winding up an estate or not reporting the loss in value of an asset to HM Revenue & Customs in time to apply for loss relief.

If a gift is not declared to HM Revenue & Customs and is later discovered, invoking a tax penalty, the executor would be liable for paying this personally.

In the event of a dispute over the contents of the Will, an executor must take care not to mismanage this and spend an excessive amount of the estate’s funds in expenses defending any legal action. At the same time, they are bound to act in the best interests of the estate and protect it as far as possible for the beneficiaries.

Professional representation

When writing a Will, a professional executor can be appointed to deal with the estate administration when the time comes. A professional will usually have more time to devote to the matter and will also be familiar with the process and how to calculate tax and prepare full estate accounts. They will also be backed by insurance, so in the unlikely event that an error was made, the estate would be unaffected.

If you have been appointed to act as someone’s executor, it is also open to you to appoint a solicitor to act on your behalf to wind up the estate.

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What happens in estate administration if an executor has died?

After someone’s death, the executor named in their Will is responsible for winding up their estate. If the executor dies, either before or during the estate administration, there is a process which must be gone through to find and appoint another executor.

The executor of an estate has the onerous task of collecting in estate assets, valuing and selling them, paying off any debts and Inheritance Tax, preparing estate accounts and distributing the estate to the named beneficiaries.

When choosing your executor, you should make sure that you select someone who is capable and who is willing to take on the role, which is usually time-consuming and can be complex. You should also consider appointing someone younger than you so that they are likely to be around to take the job on when the time comes. It is also advisable to appoint two executors, so that, in the event that one of them dies, the other one can administer the estate.

When the only executor dies before you

Ideally, in this situation you should make a new Will, appointing different executors. However, if this hasn’t been possible, then when the time comes, if any executor named in the Will has predeceased you, someone else will need to step in and apply to the Probate Registry for a Grant of Probate, giving them the authority to wind up your estate.

The Non-Contentious Probate Rules 1987 set out in order who is entitled to apply for probate. After the executor themselves, anyone who has been appointed to hold assets in trust for a residuary beneficiary is next, followed by a residuary beneficiary. The list goes on beyond this, should this category of person not be available, but usually it is the case that the main beneficiary or beneficiaries of the estate will take on the role. A maximum of four people can act as beneficiaries.

When an executor dies during estate administration

In the event that an executor dies after being issued with a Grant of Representation authorising them to wind up the estate, then the administration can be completed by any other jointly acting executor.

If there was only one executor and they have died, or if other named executors do not wish to act, then the executor named in the deceased executor’s Will is responsible for completing the administration of the estate.

This is called the chain of representation and effectively means that the executor will have to deal with the administration of two estates; the one in which they are named as executor and the original estate.

If the executor dies without making a Will, then the Non-Contentious Probate Rules apply as outlined before.

Appointing executors

To avoid the complicated situation where your estate is left without an executor, it is advisable to appoint two executors in your Will and to review these appointments regularly.

In the event that either of your executors becomes unwell, or the task of administering an estate is likely to be too complex or time-consuming for them to undertake, you should consider appointing a new executor in their place.

If you would like to discuss your options, we would be happy to hear from you.

For your own personal estate planning needs, you’re welcome to book a call with an expert via our scheduling window below:

 

 

What are estate accounts?

Following someone’s death, their personal representative will wind up the estate, then prepare estate accounts. These accounts will include details of all the assets and liabilities in the estate.

When you make a Will, you will appoint someone to act as your executor. They will be responsible for collecting in all of the assets in your estate; valuing them, insuring them where necessary, clearing and selling or transferring any property, paying off debts, to include calculating and paying Inheritance Tax. As well as preparing full estate accounts and finally distributing your estate to the named beneficiaries.

It is a complex and time-consuming job and when you select someone to take on this role you should ensure that they are willing as well as capable. If you have not made a Will, then someone will need to apply to the Probate Registry for a Grant of Letters of Administration, giving authority for them to act in a similar capacity as your administrator.

What goes in estate accounts?

The personal representative, either the executor or administrator, has a duty to provide a full inventory of the contents of the estate if required to do so by the court. As well as a full account of the estate administration, referred to as estate accounts.

The accounts will start with a summary page, with details of the deceased’s name, date of death, date of any Will, the name of the personal representative and the names of the beneficiaries and the legacies they have been left.

All of the estate’s assets will be listed, to include money, property, valuables and other personal possessions and they should all be valued.

Similarly, all the estate debts should be included. This could be tax liabilities, credit card debts, loans and mortgages.

These figures will be needed at the start of the administration process, to enable the personal representative to apply to the Probate Registry for a Grant of Representation, authorising them to wind up the estate.

The accounts should include details of any Inheritance Tax which is due. Along with any exemptions which apply, such as spousal exemption, any nil-rate band or transferrable nil-rate band, residential nil-rate band or transferrable residential nil-rate band or charitable exemption.

A capital account will also be needed, with details of any change in the value of the estate during the administration period. This could also include any over- or under-estimated values. Estate income and any interest paid to the estate should be included, along with administration expenses. This could include solicitor’s fees, estate agency fees if a property is sold and Probate Registry fees.

Finally, the distribution account will show how the estate is distributed to the beneficiaries named in the Will.

Dealing with the administration of an estate is an onerous job which can take many months or even years to complete. If errors are made, the personal representative can be held personally liable, even if it was a genuine mistake.

For this reason, it is often preferable to appoint a professional to deal with the winding-up of an estate, as they will be used to preparing estate accounts.

For your own personal estate planning needs, you’re welcome to book a call with an expert via our scheduling window below:

 

Locating missing beneficiaries

When someone dies, the person administering the estate needs to let the beneficiaries know what they are entitled to. 

All too often, beneficiaries are challenging to track down. And that can have a significant impact on the probate process.

Finding an identified beneficiary 

If you know the name of a beneficiary (for example, if they are mentioned in the Will), then the process of locating them isn’t usually too difficult. 

Things you can do to find them include:

  • Placing a note in the newspaper
  • Asking family members and friends to help 
  • Using a Tracing Agency.
  • Looking for online profiles via social media like Facebook or LinkedIn

As an executor, you must make reasonable efforts to try and find them, so it is worth speaking to your solicitor if you are struggling to do so.

Finding an unknown beneficiary

£137m of unclaimed monies (monies laid dormant for 15 years plus) were declared dormant by the five high street banks in 2019.

In many cases, these estates remain unclaimed because the deceased did not leave a Will, and it is unclear if there are any living relatives entitled to this inheritance. 

Under the UK’s inheritance laws (Rules of Intestacy), when someone dies without a Will, people who are blood relatives of the deceased could be entitled to a share of the estate. Even distant relations could be in for a windfall. However, if no heirs are found the estate Will be passed on to the Government (the Crown). 

It can be difficult to establish who the beneficiaries are, but your probate solicitor Will be able to help. Often this involves you pulling together a family tree and using a Tracing Agent to do the rest. 

It’s not enough to find any living relative, they have to be the right person to benefit under the Intestacy rules.

Where a beneficiary can’t be found, you may have to administer the estate regardless. But, you must ensure you are protected in case someone comes forward at a later date and makes a successful claim on the estate. 

To protect yourself from liability you could:

  • Obtain insurance specific to this situation
  • Apply for a Court Order to determine how the Estate should be distributed
  • Make a payment to the Court under S.63 Trustee Act 1925 (leaving a nominal sum in an estate).

Ultimately, you are financially liable for searching for missing beneficiaries, so specialist legal advice is strongly recommended.

At ADL Estate Planning we work closely with our colleagues from several major practices to support them in ensuring their clients are provided with bespoke estate planning solutions. Should you be a professional or a potential client don’t hesitate to reach out via our scheduling window below: