If you’re grieving the loss of a loved one, probate and inheritance tax are unlikely to be at the top of your mind. But they are something you will likely face when a loved one passes away, so having an understanding of both can help you be more prepared should you need to navigate them.
Here, the team at Hughes Probate Services take a closer look into what probate and inheritance tax are, explaining what they are and how they are linked. Plus, we’ll cover the important aspects it is good to know to help you gain a better understanding.
What is probate?
Probate is a court-supervised, structured legal process that occurs after someone has passed away. It ensures that their debts are paid and that their assets are distributed according to their will or, if there isn’t a will, by law.
This process aims to provide a systematic and legal resolution to the estate, safeguarding the interests of all parties involved. Probate typically takes 9-12 months to complete, depending on the complexity of the estate.
What is inheritance tax?
Inheritance tax is a tax paid on the estate of a deceased person. The amount of inheritance tax that will be paid depends on the value of the person’s estate, which includes the property, money and other assets left by the person who has died.
In England and Wales, inheritance tax is due when a person’s estate is worth more than £325,000 at the time of their death. This is payable to HMRC, and the threshold is subject to change annually when the government reviews the budget.
Currently, the inheritance tax rate is 40 per cent on anything above the £325,000 threshold. However, this may be reduced to 36 per cent if more than 10 per cent of the estate’s net value is left as a gift to charity.
How probate and inheritance tax are linked
As part of the probate process and before you apply for a grant of representation, the estate will need to be valued. It’s at this point that the inheritance tax liability will be calculated. This can be hard to navigate, so it is always advisable to seek professional advice and help to ensure you make the correct calculations.
If the estate’s value is below £325,000, no inheritance tax will be due. But if it exceeds this amount, it will need to be paid. If the deceased leaves their entire estate to a spouse or charity, this is known as an exempt estate, and they will not have to pay inheritance tax.
A grant of representation will likely be issued once the inheritance tax has been paid, so it is advisable to do this as soon as possible to ensure timely administration of the estate.
Do you need probate or inheritance tax support? Get in touch with Hughes Probate Services
If you need probate or inheritance support or advice, Julie at Hughes Probate Services is here to provide friendly and expert guidance to help you understand the process and the steps you need to take.
We pride ourselves on our compassionate approach, as we help you through what can be an extremely emotional and challenging time. Please get in touch with Julie, to arrange a cuppa – or a virtual cuppa – and an initial chat.
