5 Common Probate Mistakes and How to Avoid Them

Navigating the probate process can be challenging, particularly when you're grieving the loss of a loved one. Many executors and administrators find themselves making costly mistakes that delay the process, increase expenses, or even result in personal liability. This guide highlights the most common probate errors and provides practical advice on how to avoid them.

1. Missing the Inheritance Tax Deadline

The Mistake

One of the most costly errors is failing to pay Inheritance Tax (IHT) within six months of the death. HMRC charges interest on late payments, which can significantly increase the tax burden on the estate.

How to Avoid It

• Start valuing the estate immediately after death
• Use the HMRC online calculator to estimate tax liability early
• Consider applying for an IHT reference number as soon as possible
• For larger estates, make a payment on account even before the final valuation is complete
• Remember that certain assets qualify for payment of IHT in installments

2. Distributing the Estate Too Soon

The Mistake

Many executors rush to distribute assets to beneficiaries before all liabilities are settled. This creates personal liability if additional debts emerge later.

How to Avoid It

• Wait at least six months after probate is granted before distributing assets
• Place statutory notices in The Gazette and a local newspaper
• Maintain a reserve fund for unexpected expenses
• Consider partial distributions if the waiting period causes hardship for beneficiaries
• Get indemnities from beneficiaries if making early distributions

3. Incorrect Valuation of Assets

The Mistake

Undervaluing or overvaluing assets can lead to tax complications, disputes among beneficiaries, and potential penalties from HMRC.

How to Avoid It

• Obtain professional valuations for high-value items like property, jewelry, and antiques
• Research recent sales of similar properties in the area
• Get multiple valuations for unique or valuable items
• Document the valuation process thoroughly
• Remember to value assets as of the date of death, not current values

4. Overlooking Assets or Liabilities

The Mistake

Forgetting to include certain assets or debts in the estate inventory can cause complications, particularly if they're discovered after distribution.

How to Avoid It

• Create a comprehensive checklist of potential assets and liabilities
• Check bank statements for the past year to identify regular payments
• Look through personal papers thoroughly
• Contact financial institutions, insurers, and utility companies
• Consider using asset search services for complex estates

5. DIY Probate for Complex Estates

The Mistake

While handling probate yourself can save money, attempting to manage complex estates without professional help often leads to costly errors.

How to Avoid It

• Assess the complexity of the estate realistically
• Consider professional help if the estate includes:
  • Business assets
  • Foreign property
  • Trusts
  • Complex investments
  • Potential inheritance disputes
• Remember that professional fees are usually paid from the estate
• Consider a hybrid approach: professional guidance for complex aspects, DIY for simpler tasks

6. Poor Record-Keeping

The Mistake

Inadequate documentation of the probate process can lead to disputes, difficulty answering beneficiary questions, and problems if the executor's actions are challenged.

How to Avoid It

• Maintain a dedicated probate file with all relevant documents
• Keep detailed accounts of all income and expenditure
• Save receipts and invoices for all expenses
• Document all decisions, especially if deviating from the will's instructions
• Record communications with beneficiaries and third parties
• Use probate software or spreadsheets to track the process

7. Misinterpreting the Will

The Mistake

Misunderstanding the terms of the will or misinterpreting legal language can lead to incorrect distributions and potential liability.

How to Avoid It

• Read the will multiple times
• Seek clarification from the solicitor who drafted the will if possible
• Consider getting a professional interpretation for ambiguous clauses
• Pay special attention to residuary clauses and specific gifts
• Check for any codicils (amendments) to the will

8. Failing to Identify All Beneficiaries

The Mistake

Overlooking beneficiaries, particularly in cases of intestacy (dying without a will), can result in incorrect distributions and legal challenges.

How to Avoid It

• Create a comprehensive family tree for intestacy cases
• Use professional genealogists for complex family situations
• Place advertisements for beneficiaries if necessary
• Obtain birth, marriage, and death certificates to verify relationships
• Consider insurance to protect against unknown beneficiaries emerging later

9. Mishandling Property

The Mistake

Property is often the most valuable asset in an estate, and mismanagement can be costly. Common errors include inadequate insurance, poor maintenance, and suboptimal sales strategies.

How to Avoid It

• Ensure property remains insured during probate
• Maintain regular inspections of empty properties
• Consider the timing of property sales carefully
• Compare estate agent fees and services
• Evaluate whether minor improvements might increase sale value
• Follow the correct process for transferring property to beneficiaries

10. Ignoring Tax-Saving Opportunities

The Mistake

Missing legitimate opportunities to reduce the inheritance tax burden can cost beneficiaries significantly.

How to Avoid It

• Investigate whether the deceased made lifetime gifts that might be exempt
• Check if the residence nil-rate band applies
• Consider deed of variation options within two years of death
• Evaluate charitable giving options in the estate
• Review business property and agricultural relief eligibility

11. Handling Claims Against the Estate Improperly

The Mistake

Rejecting valid claims or accepting invalid ones can expose the executor to personal liability or unfairly reduce beneficiaries' entitlements.

How to Avoid It

• Treat all claims seriously and investigate thoroughly
• Understand the limitations period for different types of claims
• Seek legal advice for contentious claims
• Document your reasoning for accepting or rejecting claims
• Consider mediation for disputed claims before court proceedings

12. Failing to Close Financial Accounts Properly

The Mistake

Leaving accounts open or failing to redirect ongoing payments can lead to administrative headaches and potential liabilities.

How to Avoid It

• Create a checklist of all financial accounts
• Notify all relevant institutions of the death promptly
• Redirect recurring payments like direct debits
• Close accounts once funds are collected
• Ensure final tax returns are filed

Conclusion

While mistakes during probate are common, most can be avoided with careful planning, attention to detail, and appropriate professional help when needed. Taking time to understand your responsibilities as an executor and approaching the role methodically will help ensure a smoother probate process for everyone involved. Remember that the role of executor carries legal responsibilities, so when in doubt, seeking professional advice is often the most prudent course of action.