Releasing Assets Without A Grant – The “New Normal”?
At present, there is a lot of talk about our “new normal”. We have all had to adapt and adjust the way we live, work and communicate in our post-Covid-19 world, at a pace of change that has been unprecedented.
The ever-moving goal posts of the pandemic have given rise to innovation and creativity in problem solving. In fact, there is a general wish to do what we can to keep things moving, in spite of the pandemic. However, in our rush to adapt in order to keep calm and carry on, we are not always afforded the luxury of time to consider the full impact of the “new normal” we are creating.
A good example of this is within the estate administration sphere. With the aim of providing the best possible service to recently bereaved families during the pandemic, and relieving potential hardship, banks and other financial institutions have upped the amount of money they will release from a deceased client’s account without a Grant of Representation being required. As a result, some banks are now prepared to release up to £125,000.
As the law stands, under the Administration of Estates (Small Payments) Act 1965, sums of up to £5,000 can be paid over on death to those entitled, without the need for a Grant. Therefore, at first glance, this news may be seen as a welcome relaxation of the existing rules during this difficult time, with those entitled now not having to go to the trouble or expense of making an application for a Grant before potentially being able to release up to twenty five times that amount from the deceased’s bank accounts.
However, whilst there has been an upward trend over the last decade in the amounts financial institutions are willing to release without a Grant, the latest rise has been steep and sudden, and a direct response to the logistical challenges a global pandemic poses for traditional probate procedures. The only problem with this is that by looking to make life easier for people who are genuinely entitled to the cash, and removing a layer of security in the name of efficiency, life has also been made easier for fraudsters and those looking to take advantage of the vulnerable and recently bereaved.
For example, if someone fraudulently collects in the balance of an account, they may quite simply choose, illegally, to keep it (or to distribute it other than in line with the Will). A risk therefore exists that the deceased’s wishes for the devolution of their estate will not be carried out as they envisaged. These changes have also made procedures more difficult for those of us in an advisory role. Where Personal Representatives (PRs) or their advisors are unaware of an account that has already been emptied by someone else, this account will not be included within their inheritance tax calculation. The asset will not be disclosed to HMRC, and the inheritance tax paid on the estate will be incorrect.
On a practical day-to-day level, it has been reported that lawyers are encountering problems when trying to ascertain the date of death value of accounts that have already paid out, the sum ultimately released, and who it was released to. Solicitors for the Elderly have received feedback from practitioners who are spending more and more of their time trying to obtain this information from institutions who have already paid out, and then going on to challenge payments made in error. Attempting to recover funds can be a costly process, and one that the vulnerable or recently bereaved might not have the financial or emotional resources for.
Is there a solution?
Solicitors for the Elderly, troubled by recent events, recommend “a universal policy that reinforces the [established] limit for unfreezing bank account assets” and there are reports that, behind the scenes, banks are in talks about agreeing a universal upper limit on the amount of money that can be released without a Grant. The best outcome would be one that balances the more streamlined, cost-effective approach that the higher limits achieve, with an appropriate level of security. The common aim of both limbs is clear: honour the deceased person’s wishes by getting the assets to the right people as swiftly as possible.
In the meantime, financial institutions might take note of the early feedback coming in from those at the coalface. Their high service standards should extend beyond the account closure point and, where greater sums are being released, there is arguably a greater responsibility to ensure that the information PRs require for the estate administration as a whole is provided. Consequently, if and when it emerges that sums have been paid over to the wrong person, they should be quick to work with PRs to rectify this.
Ultimately, while the changes to institutions’ practices may have helped improve efficiency and relieve potential hardship in trying times, it is of the utmost importance that we ensure the process is kept safe and secure. This will require stricter guidance and eventually an agreed upper limit to the amount of money released without a grant.