Faster Probate Application Process Is Welcome

Financial Advice For Farmers

This September will see a significant change in the way applications for Grants of Probate and Letters of Administration are made in the Courts Service Probate Office and the District Probate Registries.

This change will modernise and transform the current process, making it easier and more efficient to complete.

Taking out probate basically means having the Probate Office or the appropriate District Probate Registry certify that a will is valid, and that all legal, financial and tax matters are in order, so that the executor or administrator can be allowed to get on with the job of distributing the estate.

Letters of administration are granted where no will or no valid will is in place, or where the executor dies, or is unable or unwilling to act.

Letters of administration effectively grant powers to an administrator to gather the assets of the estate and to distribute same according to the Succession Act.

Revenue have been working proactively with the Probate Office to design an online process that will reduce and in some instances completely remove the common errors encountered when completing the current paper form.

Removing these errors will lead to reduced processing timelines for applications going forward.

Currently, it takes over four months for the grant of probate to issue, and longer where errors or discrepancies are uncovered.

The time lag in obtaining grants of probate or letters of administration can cause real difficulties for people.

These problems can be exacerbated in the case of farmers.

For instance, delays in obtaining a grant of probate for a deceased farmer can result in practical difficulties, like who has the authority to make decisions on continuing to farm the land, buying or selling stock, continuing to supply milk, claiming basic payment scheme entitlements.

Similarly, those who pick up the gauntlet while waiting for probate to issue might have to fund purchases from their own pocket, in the expectation of recovering these costs from the estate.

This might be the case where extended lines of credit cannot be obtained from merchants.

Income arising to the deceased is effectively trapped until a grant of probate issues.

Those who continue to farm the land are therefore left with the burden of all the costs and none of the income until probate comes through.

Another problem with delayed applications for probate, as well as the time lag once an application is lodged, is that income arises to the deceased person’s estate, which is seen as a separate legal entity for that period.

This means delayed probate causes extra administration both in terms of registering the estate as a taxable entity, preparing accounts for the estate, and ultimately filing a tax return for the estate.

Furthermore, the estate is liable to tax at a flat rate of 20% on its income, and has no tax bands/tax credits, and is not entitled to some exemptions from income such as the leased land exemption.

Therefore, a long period of administration might result in unnecessary income tax.

Yet another problem inherent to long periods of administration is that the estate might become exposed to capital gains tax.

Say, for instance, a person leaves property worth €1m. Probate issues two years later, following a delayed application.

Delayed probate causes extra administration both in terms of registering the estate as a taxable entity, preparing accounts for the estate, and ultimately filing a tax return for the estate.

If the property is now worth €1.3m, the estate can be exposed to capital gains tax.

There are some concessions in this area, but the principle remains that delayed probate can cause tax problems.

Sometimes, actions must be taken within a specified time of death.

For instance, a beneficiary may need to invest their inheritances in agricultural land within two years from the date of death.

Again, where probate has not issued within this time, the beneficiary may not be in a position to obtain funds from the estate and make such an investment.

The changes will mean that intermediaries such as solicitors or agents, and personal applicants such as executors or administrators of an estate, will be required to submit their Inland Revenue affidavits online.

• Anyone seeking to apply for Grants of Probate or Letters of Administration will need to complete and submit to Revenue the new online version of the Inland Revenue Affidavit, called the Statement of Affairs (Probate) Form SA.2. This can be done by logging onto Revenue’s Online Service (ROS), or MyAccount which can be accessed via the www.revenue.ie website.
• A Revenue acknowledgement document will auto-generate for the applicant once the form is successfully completed and submitted electronically. This acknowledgement document is called the Notice of Acknowledgement (Probate) and will contain headline information from the form for use by the Probate Office.
• An applicant will need to print this acknowledgement and submit it to the Probate Office, along with the other required papers, in order to obtain a Grant of Probate or Letters of Administration.

It is expected the governing regulations will be signed into law and the new online form made available by mid-September 2020.

Once the online form is available, the Probate Office can only accept new applications that include Revenue’s acknowledgment document.

This means there will be no option available to submit an Inland Revenue Affidavit to the Probate Office for approval.

In preparation for the move to an online service the Probate Office will no longer accept paper applications after Friday, September 4, 2020.

The changes to the Probate Office application process come on top of changes to the inheritance tax and gift tax filing procedure (form IT38), which must in all but the most basic cases but filed online.

Chartered tax adviser Kieran Coughlan, Belgooly, Co Cork www.coughlanaccounting.com

(Source – Irish Examiner – Farming – Kieran Coughlan – 12/08/2020)