When a friend or family member dies, the beneficiaries of a will are the last in line to receive any share of the estate.
The current publicity concerning the estate of the late Boris Berezovsky, the billionaire Russian oligarch who died in Ascot in 2013, highlights this important principle. Once worth an estimated £1.9 billion, Berezovsky’s remaining estate is now thought to be worth around £100million. A firm of UK lawyers has recently successfully requested that its £12million legal bill was paid, before the personal representatives (the professionals administering his estate) have identified all of Berezovsky’s assets and assessed what his family are entitled to.
The personal representatives’ first duty is to identify, collect and value the deceased’s estate. They must then pay out in priority order:
- Inheritance Tax – The personal representatives must first estimate and then pay any inheritance tax due to HMRC. The representatives have the power to sell assets and transfer money from the deceased’s bank account, if there is insufficient cash to pay the tax bill.
- Charges, Liabilities and Debts –Next, personal representatives pay any debts owed by the estate, which includes funeral expenses. They have an obligation to search for creditors and assess any claim made by them.
- Gifts & Legacies – Finally, personal representatives can make specific legacies (gifts) and then distribute the remainder of the estate (the residue) to beneficiaries as detailed by the will.
Considering that the probate administration (the process of allocating the deceased’s estate) usually takes about a year, beneficiaries often wait a very long time for what’s left, after everyone else has taken their share.
The good news is that you can take some positive steps to protect the legacies you make and speed up probate. Firstly, have a will drafted by a professional. This will ensure your exposure to inheritance tax is assessed and, with careful planning, often reduced. It will also require you to list your assets and debts, so your personal wealth can be valued. It’s important to keep this list up to date, as it speeds up the process by which your assets can be collected, it also helps trace creditors and assess their claims. Finally, it’s worth taking professional advice with regards to any debt you must retain, as there may be more effective ways to manage it, leaving more for the people you care about.