Probate Jargon Explained England and Wales

Probate Jargon

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Probate jargon makes the process seem even more complex than it is.  Here is our attempt to make probate language easier to understand.   This page is a bit of a work in progress, so please use the form if there is a word we haven’t explained, or haven’t explained clearly.

Probate: the process of sorting out, collecting in, paying tax on, and then distributing the assets of the person who has died.   The work is the responsibility of:

Executor:  the person or persons responsible for the process of probate, obtaining the grant, paying taxes then collecting and distributing the assets.  An Administrator  is essentially the same thing.

Bereaved – those surviving.  Bereavement help.

Intestacy – dying without a valid Last Will.

Partial Intestacy – where the Will does not cover everything, perhaps because a beneficiary has died and no substitute beneficiary has been named or appointed.  The longer it is since the Last Will was reviewed, the more likely this is to occur.

Spouse – normally the legally parried / Civil Registered partner

Issue – bloodline descendants – children, grandchildren.

Grant of probate This will be issued where the deceased has left a valid Will appointing an executor who is able and willing to prove that Will.  Once the appropriate paperwork has been completed and sent to the relevant probate registry, and the executor has sworn an oath, provided the Registrar is satisfied and any Inheritance Tax has been paid, the grant of probate is issued.  This enables the executor to collect in and then distribute the assets.

Letters of administration with the Will annexed is where the deceased has left a valid Will, but either no executor able and willing to prove it, so a relative will have to apply or the executor (or one of them) has appointed an attorney to act on his behalf.  The process is the same as for a grant of probate.

Letters of administration will be issued when the deceased has not left a valid Will.  The person applying for probate goes through the same process as for a grant of probate.

Bereavement benefitsState benefits for new widows and widowers.

A testator (male) or testatrix (female): the person whose Last Will and testament it is.

Power reserved: one of the executors has decided not to get involved, but has reserved the right to change their mind later.

Intermeddled: where someone gets involved in sorting out an estate they may be said to have intermeddled and the effect of this is that they could be stuck with the role of executor or administrator even if they don’t want to be.

Renounce: an executor who does not wish to do the job can renounce it provided they have not intermeddled.  It is a formal process.

IHT:  Inheritance tax is a 40% tax on assets over £325,000 (to 5th April 2015).   It must be paid before the grant of probate is issued – that is before you can collect in any money! Where everything is left to a UK domiciled spouse, no tax is payable on the first death.  On the second death of the couple, the survivor may be able to use two £325,000 allowances.

CGT; Capital Gains Tax a tax on capital profits, there is normally no double charging with Inheritance Tax on death, but CGT has to be taken into account in Trust Planning.

Power of Attorney: a power of attorney made by the person who has died is automatically cancelled by the death, and it is illegal to use it thereafter.  Powers of Attorney are given by executors and administrators to probate professionals to allow them to get on and sort things out without having to ask the executors to sign everything.

BENEFICIARIES – those who will receive the proceeds of the death under the Will or Rules of Intestacy.

sui juris of full age and capacity.

absolutely entitled – it is theirs by right as soon as probate (if needed) is granted.

RESIDUE – what is left after specific gifts, bills and expenses have been paid.

Commorientes (where two or more people die at the same time)

Disclaimer: the expression for a person giving up their entitlement under a Will or intestacy.

Personal representatives – the person or people who are acting as executors or administrators of a dead persons estate.

 

Bona Vacantia means vacant goods and is the name given to ownerless property, which by law passes to the Crown. The Treasury Solicitor acts for the Crown to administer the estates of people who die intestate (without a Will) and without known kin (entitled blood relatives) and collect the assets of dissolved companies and other various ownerless goods in England and Wales.

Potentially exempt transfers (PETs) are gifts which might be pulled back into the Inheritance Tax net if the giver dies within 7 years (or sometimes 14 years.)

Class gifts are gifts to one or more people who are identified by reference to a particular class such as the children or grandchildren of the testator.

Gifts with Reservation

Quick Succession Relief

Abatement

Abatement is the statutory order in which assets are used towards expenses, liabilities and debts. This order is dependent on whether the estate is solvent or insolvent.

Where the estate is insolvent (the estate is insufficient to meet its liabilities), all gifts in the Will fail, as everything will be used to meet the estate’s liabilities.

Where the estate is solvent (the estate is sufficient to meet its liabilities), the order in which assets are used to cover liabilities is covered by the First Schedule of the Administration of Estates Act 1925, however, to fully understand the order stated in the 1925 Act a distinction should be made between the various types of gifts that can be made in a Will.

Specific gifts are gifts of some particular identifiable possession or item that is a distinguishable part of the Testator’s estate. For example, gifts of chattels, jewellery, real property or bank accounts.

General gifts are gifts not of a precise thing, it is more an instruction for something to be provided out of the Testator’s general estate. A gift of money will nearly always be a general gift. A Testator leaving a gift of £1000 may not have such cash in their estate and their executors must raise the money to make such a gift.

Demonstrative gifts are a hybrid of the two. It is essentially a general gift that has to be satisfied from a particular fund, for example £2000 from my bank account held with RBS. Using this example, if there is only £1500 in the specified RBS account at the Testator’s death, the remaining £500 will be treated as a general gift and made out of the Testator’s general estate.

Money gifts written by WillPack will be written to be general gifts (unless made out of a particular fund, in such case they will be demonstrative) and all other gifts are drafted to be specific gifts.

The main concerns from this order is as follows:

  1. Assets in the Residuary Estate are firstly used to pay towards the liabilities, each person’s share in the Residuary Estate will be reduced rateably.
  2. If the Residuary Estate is not large enough to cover liabilities, any general gifts shall then also be used, each general gift will be reduced rateably.
  3. If the general gifts are also not enough to cover liabilities then specific gifts will have to be used, these will again be reduced rateably.

This statutory order can be varied, for example it can be stated that a certain gift shall have priority over all other gifts.

For the purposes of this order, demonstrative gifts are treated as if they are specific so far as they can be satisfied out of the specific fund. Anything that cannot be satisfied shall be treated as a general gift.

ADEMPTION

A specific legacy will fail if the subject matter of the gift does not form part of the estate at death: the gift is adeemed. Ademption usually occurs because the property has been sold, given away or destroyed during the testator’s lifetime.

Pecuniary legacies – gifts of money in the Last Will.

Specific legacies – gifts of specific items in the Last Will.  If the items are no longer owned, the beneficiary gets nothing.

Business Property Relief  is a reduction on the Inheritance Tax bill for many types of businesses.

Bank, property, savings and other accounts: if an account (such as a bank account) or other than land is held in joint names, and there is no evidence to the contrary, then it is deemed to be owned jointly and to pass automatically to the surviving co-owner whatever may be the terms of a Will.

If the deceased was a co-owner of the property as a “tenant in common”, his share in the sale proceeds will pass according to the Will.

Probate Jargon Explained.