A guide to life insurance probate

What is probate?

Probate is the legal and financial process of dealing with any property, money and possessions that a person leaves behind when they die.

It involves someone settling your estate, and any debts you might owe, and carrying out the wishes laid out in your will about how your assets should be shared out.

If a person dies without a will, the law decides who is responsible for dealing with probate and who’s entitled to inherit.

What is an estate?

Once you die, everything you own becomes part of your estate. This is made up of the money, property and possessions you leave behind.

For example, your home, bank accounts, financial investments, and pension will all form part of your estate.

Your estate will also include any debts you owe, like a credit card or loan, as well as any outstanding amounts that are owed to you.

After your debts have been settled, what’s left in your estate will be distributed according to your wishes if you left a will, or according to intestacy rules if there’s no will.

How does probate work when someone dies?

When a person dies, someone needs to take on the process of settling their affairs and distributing their assets.

The legal process of administering a person’s estate is known as probate.

Whether you need to go through probate will depend on the value of the estate and whether the person’s assets are jointly owned.

If there’s a will and probate is required, you’ll need to apply for a grant of probate - also known as the grant of representation.

This gives you legal permission to access bank accounts, sell assets, and generally deal with the person’s estate.

When you’re granted probate, you’re required to follow specific rules for distributing assets to the beneficiaries.

Who can manage probate?

It’s possible to manage the probate process yourself if you're named as an executor in the person’s will.

However, not everyone dies with a will. When this happens it’s called ‘dying intestate’ and the rules of intestacy apply.

To be legally allowed to deal with the estate if there’s no will, you’ll need to be the closest living relative.

As the next of kin, you can apply for a grant of letters of administration to become the administrator of the estate and manage probate.

The alternative to managing probate yourself is to use a solicitor. This can cost thousands of pounds but it may be worth it if the estate is complicated to sort out.

Once probate is granted, you can start gathering the person’s assets, paying off any money owed, and distributing what’s left according to their will or the rules of intestacy.

Does everyone need to apply for probate?

Whether you need probate depends on a number of factors, including the value of the estate and whether the assets are jointly owned.

For example, if the person who died only had a small amount in their bank account and didn’t own much else, it’s unlikely their estate will have to go through probate.

Banks and financial institutions set their own limits for probate, so it’s worth checking with them first to see if you need to apply for a grant of representation.

You won’t usually need to go through probate if all the assets are held in joint names, as they should automatically pass to the surviving owner.

How does life insurance probate work?

This will depend on how the life insurance policy is set up.

If the policy wasn’t written in trust, any life insurance payout will be considered part of the deceased person’s estate and will need to go through probate.

The lump sum will be paid into an account that’s held by the executor of the will. It may be subject to inheritance tax before it can be distributed to the beneficiaries.

On the other hand, if the policy is written in trust, the payout will go directly to your beneficiaries without having to go through probate.

When it’s set up this way, your loved ones can receive the money much more quickly.

Do I need to state a beneficiary for my life insurance?

A beneficiary is a person or entity you choose to receive your life insurance payout if you pass away during your policy term.

Anyone can be named as a beneficiary and this can include:

• A spouse
• A civil partner
• Children or stepchildren
• Parents
• Siblings
• Friends
• Charities
• Trusts

Naming your beneficiaries can help the life insurance claim to be processed more quickly and makes distributing the money from a payout more straightforward.

For this reason, most life insurance policies require you to name at least one beneficiary.

If there’s no beneficiary, the money from any payout will typically become part of your estate and will be distributed according to probate rules.

How do I apply for probate?

1. Register the death - You should do this within five days. You’ll need to arrange an appointment with a register office, preferably in the area where the person died - you can find the nearest one on gov.uk.

   Because you’ll need to send an original copy of the death certificate to various organisations and financial institutions for probate, it’s best to buy extra copies.





2. Find out if there’s a will - If the person left a will, this will usually name one or more people as the executor.

   If no executor is named, a beneficiary can apply for probate to be the administrator of the estate instead. If there’s no will, the closest living relative can apply.





3. Value the estate - Before you apply for probate, you’ll need to estimate the value of the estate to see whether there’s inheritance tax to pay and if probate is needed.

   Different banks and financial institutions have different thresholds for whether you need probate to access the person’s assets.

   You may not need to apply for probate if the person’s estate is worth less than £10,000, or if they jointly owned everything with someone else who’s still alive.





4. Pay any inheritance tax due - if you need to pay inheritance tax, you’ll need to fill out and send the relevant forms and wait 20 days before you apply for probate.

   You normally have to pay at least some of the tax before you’ll get probate but you can claim this back from the estate if you use money from your own bank account.





5. Apply for probate - The will’s executor will need to formally apply for probate to start the process - you can do this online or by post. Or your appointed solicitor can do this on your behalf.

   To apply you’ll need:

   • The original death certificate (or an interim death certificate from the coroner)
   • The original will if you’re the executor
   • To have estimated and reported the value of the estate (and submitted any inheritance tax forms)

What’s the difference between a grant of probate and letters of administration?

A grant of probate is the document that the executor named in the will needs to apply for to start the probate process.

If there’s no will, the deceased’s next of kin needs to apply for a grant of letters of administration.

Both types of document work in a similar way - by granting the person legal authority to administer the estate.

Whose responsibility is it to get probate?

If the person who died left a will, this should name one or more executors.

It’s the executor’s responsibility to find out if probate is needed and apply for a grant of representation.

When there’s no will, the UK legal inheritance rules apply - these are called the rules of intestacy.

These rules determine who should apply for probate and who is entitled to inherit.

What is a will?

A will is a legal document that sets out your wishes once you die. It explains what you want to leave and who you want to leave it to.

For it to be valid, you need to sign your will in the presence of two independent witnesses, who must then also sign the will.

You can write your will yourself, but you should only do this if it’s very simple - it’s best to use a legal template to help make sure it’s valid.

Using a solicitor to write your will does cost more, but it’s usually the safest option to make sure your wishes are reflected accurately and reduce the chance of a dispute.

Solicitors can also help you to make the most effective choices when it comes to inheritance tax and will usually store a copy of your will free of charge.

Who is an executor?

Executors are people named on a will who are given permission to deal with settling and distributing your estate after you’ve passed away.

When you’re writing a will, you could choose a family member or friend to be an executor.

They don’t have to be related to you but they do need to be someone you trust and who’s willing to take on the work and responsibility involved.

It’s a good idea to choose at least two executors in case one of them dies before you.

A solicitor or accountant can also be appointed to act as your executor, but they will charge you for this - this cost is usually taken out of the money left in your estate.

Can I settle an estate without probate?

Most estates will need to go through probate, but there are a few circumstances where this won’t be necessary.

It depends on the value of the estate and whether the assets are jointly owned.

Any assets that are in joint names - like bank accounts, life insurance policies, and property - will be transferred to the surviving co-owner, so probate won’t be required.

This is also the case for any assets that are held in trust.

For example, you won’t have to go through probate for a life insurance policy written into trust. Although you may have to go through probate for other assets in the estate.

Probate also won’t be required if the value of a bank account or investment is below their probate threshold - so it’s important to check with the relevant financial provider.

How much does applying for probate cost?

This will partly depend on the value of the estate and whether you’ll be applying for probate yourself or using a probate specialist.

If the value of the estate is more than £5,000, the application fee is £273. If the estate’s worth less than this, there’s no cost.

You may be able to get help with the fees if you’re on a low income or receiving certain benefits.

If you’re using a probate specialist, like a solicitor, to apply for and manage probate, you’ll need to pay costs on top of the application fee

They may either charge an hourly rate or a fee that’s a percentage of the value of the estate - this is typically 1% to 5% of the estate’s value, plus VAT.

How long does probate take?

You’ll usually receive your grant of probate (or letters of administration) document within eight weeks of sending your application, unless you’re asked for additional information after you’ve submitted it.

In general, once you’ve received your probate document, it can take around six to 12 months to complete the probate administration process.

But there are several factors that can affect how long it takes, including if the administration involves selling a property or if any of the assets are held overseas.

What happens once probate has been granted?

As soon as you’ve received the probate document, you can start dealing with the estate.

1. Tell relevant organisations - You’ll need to let all relevant organisations know that the person has died and to close their accounts.

   This includes informing banks, building societies, and government organisations - they’ll each need a copy of your probate document.

   You can use the Tell Us Once service to report the person’s death to relevant government departments and the local council in one go.





2. Set up an executor bank account - If you’re dealing with the estate, it can be easier to set up a special bank account to gather all of the cash assets in one place.

   This can also be used to make payments on behalf of the deceased person. The account can be closed once all the administration and estate distribution is complete.





3. Claim on life insurance - As part of gathering the person’s assets together, you’ll need to find out if they had a life insurance policy and see if you can make a valid claim.





4. Pay taxes and debts - You’ll need to make sure any taxes and debts are paid, including unpaid personal taxes, mortgages, loans and credit cards.





5. Sell any shares or property - you won’t be able to sell any assets until you’ve been granted probate. You may have to pay capital gains tax if they’ve gone up in value since the person died.





6. Distribute the estate - Once you’ve paid any debts and taxes, you can distribute what’s left in the estate according to the will, or intestacy rules if there isn’t a will.

What else to consider

If you’re using a solicitor or probate specialist, it’s a good idea to compare quotes and shop around as well as getting trusted recommendations.

When you’re choosing executors and trustees, think carefully about who you ask and make sure they’re happy to take on the responsibility - it can involve a lot of time and paperwork.

Taking out life insurance can give you peace of mind that anyone who depends on you will be taken care of financially when you die.

Putting your life insurance policy into trust could save your loved ones from having to pay inheritance tax on the payout, and can help them access the money more quickly by avoiding probate.