Navigating the legalities and processes involved with a deceased person’s estate can be complex, especially when it comes to accessing funds. This guide will address the question of whether money can be released before probate and explore the potential benefits and drawbacks of doing so.
Can Money Be Released Before Probate?
In most cases, financial institutions require a Grant of Probate before releasing funds from a deceased person’s account. This legal document confirms the executor’s authority to administer the estate’s assets. Obtaining a Grant of Probate can be a lengthy and complex process, involving completing an inheritance tax return and satisfying the court about the estate’s details.
However, there are situations where financial institutions may release funds before a Grant of Probate is obtained:
- Limited Amounts: Some banks may allow the release of small amounts, typically under £5,000, without a Grant of Probate. This limit is set by HMRC to ensure inheritance tax is not evaded.
- Exceptional Circumstances: In exceptional circumstances, such as covering funeral expenses or urgent bills, banks may consider releasing larger sums without a Grant of Probate. However, they will likely require supporting documentation and evidence of the need for the funds.
- Joint Accounts: If the deceased held a joint account with rights of survivorship, the surviving account holder can access the funds immediately without a Grant of Probate.
Benefits of Releasing Funds Before Probate:
- Faster Access to Funds: This can be crucial for covering immediate expenses, such as funeral costs or ongoing bills.
- Reduced Stress for Beneficiaries: Avoiding the probate process can alleviate stress and anxiety for beneficiaries during a difficult time.
- Flexibility for Executors: Executors can use the released funds to manage the estate more effectively, such as paying outstanding debts or making necessary investments.
Drawbacks of Releasing Funds Before Probate:
- Potential for Fraud: Releasing funds without a Grant of Probate increases the risk of fraud, as it may be easier for someone to falsely claim to be an executor or beneficiary.
- Limited Amounts: The amount of money that can be released without a Grant of Probate is often limited, which may not be sufficient to cover all immediate needs.
- Inconsistency Among Banks: Different banks may have varying policies and limits for releasing funds without a Grant of Probate, creating confusion and inconsistency.
While releasing funds before probate can offer some benefits, it’s important to weigh the potential drawbacks carefully. Consulting with a financial advisor and an estate planning attorney can help you understand your options and make informed decisions about accessing funds from the estate.
Additional Considerations:
- Stay Alert and Respond Quickly: After a death, it’s crucial for executors and beneficiaries to stay alert and respond quickly to protect the estate against potential fraud.
- Contact Relevant Institutions: Contacting banks and building societies promptly is essential to ensure that the executor’s details are on record and facilitate communication regarding the estate.
- Maintain Communication with Beneficiaries: Executors should keep beneficiaries informed about the estate’s progress and any decisions made regarding the release of funds.
By understanding the legal requirements, potential benefits and drawbacks, and additional considerations, you can make informed decisions about accessing funds from the estate before probate. Remember to seek professional guidance to navigate the complexities of estate administration and ensure a smooth and efficient process.
However, could this sudden change be a problem?
Regretfully, there are those who view death as a chance to perpetrate fraud, taking advantage of bereaved family members who are frequently elderly and susceptible. A grant of probate provides some protection because the procedure to obtain one helps to guarantee that the person obtaining the assets is the rightful owner. Furthermore, in order to combat fraud, Grants of Probate now come with a high-security hologram, which gives them an even greater advantage over forgeries. However, in situations where banks do not require a grant, it becomes simpler for someone to make up a claim to be an executor or beneficiary of an estate. This can be achieved, for instance, by presenting an outdated will or even by claiming that there is no will at all.
Banks have procedures in place for disbursing money without a grant, such as demanding to see the executor’s identification, a certified copy of the will, or copies of the death certificate. However, this is by no means foolproof. The lax attitude banks seem to have toward law firms is another issue. Accounts have been known to be closed in these situations, and proceeds disbursed without any supporting documentation other than a letter on the letterhead of a law firm. Furthermore, there are worries about how the legitimate executor and beneficiaries will try to recover funds if someone manages to obtain them fraudulently from an estate.
Is there a solution?
Beneficiaries can take precautions by making sure the real executor is identified as soon as possible. By doing this, beneficiaries can ensure that the executor is holding the deceased’s assets in a responsible manner. Additionally, it’s critical that the executor and family members get in touch with the appropriate banks and building societies as soon as possible so that the bank has their information on file. However, the inconsistency between banks compounds the problem. While some banks might release £100,000 without requiring a grant, others might require one before releasing £30,000. Finding out each bank’s current financial limits is a very simple process. Therefore, fraudsters can focus their efforts on banks that are prepared to release larger sums of money and possibly also have laxer protocols.
Within the banking industry, there is a general consensus that in order to maintain consistency, an agreement must be reached over a fair financial limit. £5,000 is obviously too little, but £125,000 might tip the scales too much in the other direction. It is hoped that eventually a compromise will be reached, weighing the risk of putting vulnerable individuals in greater danger if banking procedures are loosened against the withholding of funds until a Grant of Probate has been obtained. For the time being, the best defense against potential fraud for executors and beneficiaries of an estate is to remain vigilant and act promptly following a death.
First published on eprivateclient. Reproduced with permission.
When Will I Get My Money From The Probate?
FAQ
How do beneficiaries receive their money?
How long does it take to release money from the estate?
Can family withdraw money from deceased bank account?
Can a bank release funds without probate in Texas?
Does your estate need to go through probate?
Many common assets, including real estate and retirement accounts, won’t need to go through probate. If you need to take an estate through a probate court proceeding, don’t despair. It doesn’t necessarily mean that every single thing the deceased person owned will have to be included in the probate process.
How does probate work?
The probate process begins when you ask the probate court to be appointed as executor or personal representative. Next, you’ll gather the deceased person’s property and open a bank account in the name of the estate. You’ll then pay debts and taxes. Finally, you’ll distribute the remaining assets to inheritors and close the estate.
Can an executor transfer assets if probate is completed?
In most states, an executor must ask for and receive an order from the court approving the disbursements from the estate to beneficiaries even if probate has been completed. The court typically won’t allow the transfer of some estate assets to some beneficiaries before the estate closes – without a very good reason.
What happens when an estate moves through the probate process?
When an estate moves through the probate process, it cannot formally close until the final distribution of assets is made. In short, the final distribution describes when probated assets are transferred to the decedent’s beneficiaries. Here, it is helpful to understand the difference between probate assets and non-probate assets.