May 18, 2011
Guest Post: The Financial Implications of Wills and Probate
Probate is basically the process involved in establishing who is able to distribute the assets that are tied up in a will. In most cases, the deceased should have named an executor in their will – this is the person responsible for obtaining probate, and dealing with any other financial implications of the death.
The amount payable in inheritance tax is declared by the government or state, and the desired distribution of any monies and other assets should be clearly laid out in the will. However the cost of obtaining probate is a further financial implication of death, and one that can vary wildly should it not be carefully monitored.
Whilst probate is obtainable without the need for legal help, this isn’t usually recommended. While initially it may seem like the ideal way to keep the probate cost to a minimum, should any mistakes be made the cost of putting them right could be substantial. In addition, obtaining probate is time consuming and stressful, and is not an ideal situation to be in following the death of a loved one.
There are a few alternatives to consider in regards to obtaining probate, and the probate cost associated with them can vary significantly. In many cases, the deceased’s bank will ‘kindly’ offer to obtain probate on your behalf. However they will usually charge a percentage of the estates value, and it is not uncommon for them to, in addition, charge an hourly rate for the work carried out. While the bank may state that this is the easiest solution since it is with them that the deceased’s monies lie, there is very little difference in complexity should the process be outsourced to an external legal firm or probate specialist?
It should be noted however, that many legal firms and other probate specialists will charge both a percentage of the estates value and an hourly fee. While the probate cost could be minimal this way (assuming there are few assets of value tied up in the estate, and the process of obtaining probate is short and simple), it is very easy for firms to drag out the time they take to apply for probate, therefore charging over the odds for the amount of work they have done.
The best way to keep probate cost and the financial implications of a death to a minimum is to seek out a firm that will offer a fixed fee for their services. This will entail them predetermining the complexity of the estate and then providing a quote based upon their findings. The additional benefit to a fixed fee service is that it offers peace of mind – even if the case turns out to be more complicated than initially thought, no more money will have to be extracted from the will than was expected.
A final point to consider is how important it is to create a will. Should a person die without a will, the stress incurred on their immediate family can be substantial - obtaining probate is significantly more complicated in this situation. This predicament also means that the deceased has no say in who inherits their belongings and assets. This could mean that family members who the deceased did not know or get along with may inherit substantially, while those close to them, such as an unmarried partner, may not receive anything.
Author: The above post was written by James Harper for Wills and Probate Service. He writes on a number of topics including personal finance.