What if we get Probate amounts slightly wrong?

Technosaurus

Hi everyone - my f-i-l passed away quite suddenly and my wife is his sole executor preparing Probate. His will is relatively simple - everything passes to my wife's Mum, so there is no IHT in play etc.

However my f-i-l was a very financially savvy man who had all manner of savings instruments. He did all the household finances and my m-i-l took little-to-no-interest in his various schemes and plans, to the point where she genuinely has no idea what is where. As an example, she had a five figure sum in a savings account in her name that he had set up 3 years ago and she had no idea it was hers at all! 

We think we have tracked everything "major" down - main savings accounts, ISAs, pensions, major shareholdings - but we cannot rule out the possibility that there are some other products out there that literally nobody knows about other than him and we'll have no way of finding out until they get in touch for whatever reason... so my question is what happens if my wife 'misdeclares' the estate for Probate purposes? Will she be in any trouble?

To give some context, my bet would be on small scale individual share purchases as he definitely mentioned a couple to me over the years which he got usually with sharesave schemes at work or when building societies were bought out etc. At a guess I'd say maybe a few grand here and there, but we never fully know! He told me this usually after a few pints so my recollections of exactly which are hazy...

Keep_pedalling

No, it won’t cause any issues or trouble for your wife. 

poseidon1

No immediate tax issues for the wife, if only considering IHT on death.

However, there may well be income tax and future cgt compliance issues she will be unequipped to deal with as mystery assets rise to the surface in the months/years to come.

 For example untaxed/uncashed dividends on certificated holdings;  future maturing interest on unidentified online fixed deposit accounts etc. For a while, she will not know if she is correctly reporting her personal income tax position each year.

Once investment holdings are eventually identified, there is the necessity to conduct retrospective probate valuations, to calculate the correct CGT  payable thereon when making future disposals of those holdings.

So for these taxes, yes the wife may well have ongoing issues.

Technosaurus

Hi @poseidon1, thanks for this and you make very valid points.

Sadly I had this very conversation with my f-i-l a couple of years ago about his various shares, which he didn't want to sell due to CGT, even though he was in his 70s and I said IHT would be more of a pressing concern! He was very much a 'save for the future' kind of guy and I think it was hard for him to 'cash in his chips', he much preferred to look for growth and attractive rates of return, if you see what I mean. 

I have arranged for my m-i-l and wife to take proper financial advice, we have an appointment with one of her bank's 'Wealth Managers'... but they said until Probate has gone through they can't really do anything meaningful, hence we wanted to apply for Probate asap. This is why we have tried to act relatively fast but were concerned about misdeclaring the exact value of the estate - although that seems like it might not be a problem.

poseidon1

Technosaurus said:

Hi @poseidon1, thanks for this and you make very valid points.

Sadly I had this very conversation with my f-i-l a couple of years ago about his various shares, which he didn't want to sell due to CGT, even though he was in his 70s and I said IHT would be more of a pressing concern! He was very much a 'save for the future' kind of guy and I think it was hard for him to 'cash in his chips', he much preferred to look for growth and attractive rates of return, if you see what I mean. 

I have arranged for my m-i-l and wife to take proper financial advice, we have an appointment with one of her bank's 'Wealth Managers'... but they said until Probate has gone through they can't really do anything meaningful, hence we wanted to apply for Probate asap. This is why we have tried to act relatively fast but were concerned about misdeclaring the exact value of the estate - although that seems like it might not be a problem.

Per HMRC guidance below, since spouse gets the entire estate ( and if below £3 million ) then the excepted estate rules should apply to assist in fast turnaround of probate.

https://www.gov.uk/valuing-estate-of-someone-who-died/check-type-of-estate

I am not a big fan of high street bank wealth managers, so hopefully you can keep an eye on whether the Bank wealth manager with their limited range of solutions and products come up with an acceptable plan of action for your MIL. 

I assume you are preparing the probate inventory of assets and liabilties at death as best you can, but bear in mind if the numbers you have already, sail close to the £3 million cut off, this may trigger a bit more diligence in being as accruate as you can be when obtaining the Grant based on excepted estate criteria.

If potential IHT on MIL's eventual death looks like a future concern, no doubt a solicitor for Wills and possible IHT mitigation strategy might also be on the cards.

Technosaurus

Cheers @poseidon1

Although he was very savvy and managed his money well, we are nowhere near the £3m cutoff, but thanks for flagging!

I happen to agree with you about Wealth Managers, but it's more of a 'Fisher Price' approach with my m-i-l at the moment, she's never so much as paid a council tax bill for the last 40 years, so having an array of assets and tax considerations is going to be quite the leap! I suspect she's going to want the easiest possible option, ie putting everything in one place and in either cash or very low-risk savings products, suspect the Wealth Manager isn't going to be doing much and an IFA wouldn't earn mega commission off our chat! 

poseidon1

Technosaurus said:

Cheers @poseidon1

Although he was very savvy and managed his money well, we are nowhere near the £3m cutoff, but thanks for flagging!

I happen to agree with you about Wealth Managers, but it's more of a 'Fisher Price' approach with my m-i-l at the moment, she's never so much as paid a council tax bill for the last 40 years, so having an array of assets and tax considerations is going to be quite the leap! I suspect she's going to want the easiest possible option, ie putting everything in one place and in either cash or very low-risk savings products, suspect the Wealth Manager isn't going to be doing much and an IFA wouldn't earn mega commission off our chat! 

I certainly understand that in this case a spouse who has steadfastly refused to engage with any financial matters during the course of the marriage will be unequipped to deal with anything more sophisticated than bank deposit accounts ( a shame really).  I imagine a keep it simple/safe approach will be necessary here.

Savvy_Sue

poseidon1 said:

Technosaurus said:

Cheers @poseidon1

Although he was very savvy and managed his money well, we are nowhere near the £3m cutoff, but thanks for flagging!

I happen to agree with you about Wealth Managers, but it's more of a 'Fisher Price' approach with my m-i-l at the moment, she's never so much as paid a council tax bill for the last 40 years, so having an array of assets and tax considerations is going to be quite the leap! I suspect she's going to want the easiest possible option, ie putting everything in one place and in either cash or very low-risk savings products, suspect the Wealth Manager isn't going to be doing much and an IFA wouldn't earn mega commission off our chat! 

I certainly understand that in this case a spouse who has steadfastly refused to engage with any financial matters during the course of the marriage will be unequipped to deal with anything more sophisticated than bank deposit accounts ( a shame really).  I imagine a keep it simple/safe approach will be necessary here.

Actually, if MIL hasn't yet thought about Power of Attorney, now might be the time ... 

Technosaurus

Thanks @Savvy_Sue - due to the untimely death of both of my parents 10 years ago we did manage to get them to do PoA which is place should it be needed, but yes a very valid point