What families need to know about probate and inheritance tax

When someone dies, families are often faced with numerous practical responsibilities at an already difficult time. Dealing with probate can seem overwhelming, particularly for those unfamiliar with the process.

What does probate actually involve?

Many people assume probate is simply about obtaining a grant and distributing assets. However, modern estates can be far more complex. Property, investments, business interests, trusts, and inheritance tax considerations often require careful management and specialist knowledge.

Executors carry significant responsibilities. They must identify and value assets, settle liabilities, ensure accurate inheritance tax reporting, and distribute the estate in accordance with the will or the rules of intestacy. Mistakes can lead to delays, penalties, and disputes between beneficiaries.

Why probate is also a moment for inheritance tax planning

A frequently overlooked aspect of probate is the wider tax position of the family. The administration of an estate can often identify opportunities for inheritance tax planning that may benefit surviving spouses, children, and future generations. Unfortunately, many families only begin to consider inheritance tax after a bereavement, when valuable planning opportunities may already have been lost.

With inheritance tax thresholds remaining frozen while property values continue to rise, increasing numbers of families are being drawn into the inheritance tax net. As a result, obtaining advice from professionals with specialist inheritance tax expertise has become increasingly important.

Example case study: the retired couple with a £1.5 million estate

Barbara assumed that because she had a will and everything would pass to her children, her affairs were in order. However, a review of her estate showed that future inheritance tax liabilities could be higher than expected. Like many families, she discovered that changes to tax legislation and rising asset values meant it was worth taking a new look at her plans.

Barbara, aged 75 is widowed and lives in the family home she and her late husband bought 45 years ago. Between her house, investments and savings, her estate is worth approximately £1.5 million.

Barbara has always assumed that everything will pass to her two children with little inheritance tax to pay because she has a will in place and her husband left everything to her on his death.

Following a review of her affairs, she discovers that her estate could face a current inheritance tax liability of £200,000. She is also surprised to learn that changes to the inheritance tax treatment of pensions may increase the value of assets potentially subject to IHT from April 2027 onwards.

By taking advice early, Barbara is able to:

Understand the reliefs and allowances available to her – ensure both spouses’ nil rate bands and residence nil rate bands are fully understood and utilised where available
Consider making gifts during her lifetime – Barbara has surplus capital that she is unlikely to need during her lifetime. She decides to make gifts to her children and grandchildren. Larger gifts may become exempt from IHT if she survives 7 years. She also establishes a pattern of gifting from excess income, helping younger family members with school fees and saving plans.
Ensure her will reflects her current wishes and family circumstances – Barbara’s will is over 15 years old. Family circumstances have changed and asset values have increased considerably. A review confirms that the will still reflects her wishes and makes the best use of available allowances and reliefs.
Understand the impact of pension wealth – Barbara’s pension represents a significant proportion of her wealth. She checks that her expression of wishes is up to date. She reviews how upcoming changes to the taxation of pension death benefits might affect her family’s position. This helps ensure pension assets pass in line with her wishes and as she is a basic rate tax payer, she is now considering drawing down additional income from her pension and gifting it as surplus income to the next generation.

The review gives Barbara clarity over her family's future position and identifies opportunities that may help reduce the eventual tax burden on her children

Why effective estate planning goes beyond tax

Effective estate planning is about more than reducing tax. It provides clarity, protects family wealth, and helps ensure assets pass in accordance with personal wishes. Wills, trusts, powers of attorney, gifting strategies and succession planning can all play an important role in preserving wealth for future generations.

Professional advice can help families administer estates efficiently, avoid unnecessary complications and identify important tax considerations. Importantly, probate can also act as the starting point for more detailed tax planning, helping families structure their affairs in a way that makes full use of available reliefs and exemptions.

How we can help

At UHY Ross Brooke, we do far more than assist with probate applications and estate administration. Our specialist tax team works closely with individuals and families to provide tailored inheritance tax and estate planning advice, helping to protect wealth, minimise future tax liabilities and ensure that assets are passed to future generations as efficiently as possible.

If required, we can deal with estate tax returns reporting the income to HM Revenue and Customs and also assist with the preparation of wills and lasting powers of attorney, helping clients put in place a comprehensive plan to protect their assets and ensure their wishes are carried out both during their lifetime and after death.

This combination of probate expertise and specialist tax planning enables us to provide comprehensive support during a difficult time while helping families plan confidently for the future.