Wills and estate administration
22. Is it essential for an owner of assets in the UK to make a will in the UK? Does the will need to be governed by the laws of the UK?
It is not essential for an owner of assets in England and Wales to make a will there, but it is advisable.
A will made under the law of a foreign jurisdiction can apply to assets in England and Wales (see Question 25).
23. What are the formalities for making a will in the UK? Do they vary depending on the nationality, residence and/or domicile of the testator?
Wills must be:
- In writing.
- Signed by the testator in the presence of two independent witnesses, who must sign the will in the presence of:
- the testator; and
- each other.
The statutory definition of a will in England and Wales includes any testamentary instrument validly made under the law of another country.
24. Is it possible to make a post-death variation (that is, are there any special rules which apply if testamentary provisions or the provisions of intestacy rules are varied after the date of death by the agreement of the beneficiaries, or are such variations treated as lifetime dispositions by the beneficiaries)?
Individuals commonly use post-death variations of wills (or of the provisions made under the intestacy rules) to reduce IHT liability.
For IHT and CGT purposes, a post-death variation is treated as if the gifts contained within it had been made by the deceased (if it is made within two years of death and the appropriate tax elections are made).
25. Please describe how/to what extent wills made in another jurisdiction are recognised as valid/enforced in the UK. Does the UK recognise a foreign grant of probate (or its equivalent) or are further formalities required?
Validity of foreign wills
A will is recognised as valid if it complies with the law of the country where one of the following applies:
- The testator was domiciled at the time the will was executed or at his death.
- The testator was habitually resident at the time the will was executed or at his death.
- The testator was a national at the time the will was executed or at his death.
Validity of foreign grants of probate
Generally, a grant of probate under the law of England and Wales is required to administer property owned by the deceased in England and Wales.
The court in England and Wales issues a grant of probate to the person entrusted with the administration of the deceased's estate by the court having jurisdiction in the place where the deceased died domiciled. A grant of probate under the law of England and Wales will be issued to the persons entitled to administer the estate in the country of the deceased's domicile where there is no such person because either:
- A grant application has not yet been made in the country of the deceased's domicile.
- The court in the country of the deceased's domicile does not appoint personal representatives recognised under the law of England and Wales.
If the deceased died domiciled in a country to which the Colonial Probates Acts 1892 and 1927 apply and a grant of probate has already been issued in that country, an application can be made for the grant to be resealed so that it may be used to administer the estate in England and Wales.
26. Are there any particular practical issues that are relevant where individuals from another jurisdiction die in the UK?
Where individuals from another jurisdiction die in the UK, executors may find that certain assets have vested directly in the heirs in accordance with the law of the deceased's domicile and those assets are not available to them for the payment of debts or taxes in the UK.
27. What is the extent of the role of the executor(s) and what powers does he have? Who is responsible for the administration of the estate or does it vest in the heirs without vesting initially in the personal representatives?
Executors and administrators (personal representatives) are responsible for administering the deceased's estate. Executors are appointed by will and administrators are appointed on intestacy. The deceased's estate vests in the personal representatives, who then distribute it to the heirs.
The powers and responsibilities of a personal representative include:
- Ascertaining and collecting in the assets of the deceased.
- Obtaining a grant of representation.
- Ascertaining and paying the deceased's debts (including all taxes).
- Distributing the assets to those entitled under the will or on intestacy.
28. What is the procedure on death in the UK for tax and other purposes in terms of:
- Establishing title and gathering in assets (including any particular considerations for non-resident executors)?
- Paying taxes?
- Distributing?
Procedure for establishing title and gathering in assets
A grant of representation (for example, a grant of probate if there is a valid will) is usually required to establish title to the deceased's estate.
Certain assets, such as those owned jointly with another, may not form part of the estate on death (see Question 31).
To gather in and sell the deceased's assets, the personal representatives need to produce the grant of representation to:
- The relevant banks.
- Company registrars.
- Purchasers of real property.
Procedure for paying taxes
Personal representatives must file an account with HMRC, giving full details of the deceased's estate for IHT purposes. There are time limits for filing the account (see Question 29).
On the death of a foreign-domiciled person with assets in the UK, the IHT account must be filed at the Charity, Assets & Residence IHT section of HMRC for consideration of the deceased's domicile status and assessment to tax.
A grant of representation will not be issued until the IHT account has been produced to the relevant Probate Registry showing that all IHT payable on delivery of the account has been paid. This can prove problematic, as the deceased's assets are frozen and inaccessible until the grant of representation has been obtained and produced to the relevant banks and so on. Personal representatives sometimes therefore have to borrow to pay the IHT.
Procedure for distributing the estate
Claims can be brought against the deceased's estate within six months of the grant of representation (see Question 30). Personal representatives may therefore prefer not to distribute before the six-month period has elapsed.
Winding up an estate can often be delayed because of the need to:
- Obtain clearance that all the IHT has been paid.
- Pay any ICT due.
In these cases personal representatives may consider making an interim distribution to the beneficiaries.
It is good practice:
- For estate accounts to be prepared.
- For a copy of the estate accounts to be sent to each residuary beneficiary, who should be asked to sign them by way of receipt, discharge and indemnity to the personal representatives.
29. Are there any time limits/restrictions/valuation issues that are particularly relevant to an estate with a foreign element?
The IHT account must be filed with HMRC within 12 months from the date of death. There is a £200 penalty for late filing. IHT is payable within six months from the date of death. If payment is late, interest accrues at 4% (www.hmrc.gov.uk/rates/interest-late.htm). These rules apply to all estates, not just those with a foreign element.
All valuations of foreign assets must be in sterling, using the exchange rate at the date of death.
30. Is it possible for a beneficiary to challenge a will/the executors/the administrators? If so, how?
The following individuals can make a claim for financial provision out of the estate if the will or the intestacy rules do not make reasonable financial provision for them (Inheritance (Provision for Family and Dependants) Act 1975):
- Certain categories of individuals including current or former spouses and civil partners (provided they have not remarried or entered into a new civil partnership).
- Cohabitees who had lived with the deceased for two years immediately prior to death.
- Other individuals who were being financially maintained by, or who were financially dependent on, the deceased.
Claims must be brought within six months of the grant of representation and can only be made if the deceased died domiciled in England and Wales.
Anybody with a potential interest in the estate can challenge the validity of the will before the court on the following grounds:
- The will was not executed properly.
- The deceased lacked testamentary capacity.
- The deceased lacked knowledge and approval of the will's contents.
- Undue influence was brought to bear on the deceased.
- There was forgery or fraud