Mcgregor

Last week, we highlighted some practical points to note when preparing a will. The next logical question is, "what should one do when a loved one dies and leaves behind a will?"

It will be necessary for the executors to apply for a grant of probate in order to give effect to the provisions of that will. Therefore, the following steps should be taken:

Seek the advice of an attorney-at-law

Collect all original documents, e.g. the will, certificates of title, share certificates, insurance policies, bank books

Apply for a death certificate from the Island Records Office (at the very least, secure the original burial order).

Gather original receipts for funeral expenses.

It is usual for one of the executors appointed under the will to go to an attorney who will advise him of the procedure for the application for the grant of probate and the cost of doing so.

Some of the costs incurred by the estate are set out below:

Stamp duty of $2,000 must be paid before filing the application in the Supreme Court.

Advertising fees of approximately $15,000 will be incurred after probate is granted. A notice to creditors has to be published in the newspaper.

Transfer tax is charged to pass ownership of all real property (i.e. land and buildings) and shares from the testator/ testatrix to the beneficiaries under the will. It is calculated as a percentage of the value of the real property and shares as at the date of death. (It should be noted that transfer tax is charged on these items whether they are jointly owned or not.)

The rate of transfer tax will vary depending on whether the testator/testatrix died before or after June 2005. If the date of death was prior to June 2005, transfer tax is charged at the rate of approximately 15 per cent. However, if the date of death was after June 2005, transfer tax will be charged at the rate of approximately 7.5 per cent, thanks to an amendment to the Transfer Tax Act in June 2005.

Where the real property is held as joint tenants, the tax will only be charged on the interest of the testator/testatrix, rather than on the full value of that asset. Therefore, if there were two joint tenants and one died, only one-half of the value will attract transfer tax.

Stamp duty is also payable, and this is approximately 3 per cent of the total value of the estate. The estate includes money in the bank, motor vehicles, shares and real property that are not jointly owned and insurance policies in which the estate is beneficiary.

Attorneys' fees vary between 3 per cent and 6 per cent of value of entire estate. The minimum cost charged by most attorneys range between $70,000 and $100,000 There may be additionalcosts for other applications e.g. to note death when title to property is held as joint tenants.

The law permits executors to charge a commission at the rate of 6 per cent of value of entire estate for the work carried out in winding up the estate. This fee is shared among all executors.

It is not unusual for estates to be tied up in probate for many, many years, because funds cannot be identified to cover these expenses. What often occurs is that beneficiaries have to underwrite the expenses and await reimbursement or assets have to be sold, rather then transferred to the intended beneficiaries.