Inheritance payment before probate granted

This is a common question and the short answer is that, as a general rule, the estate should not be distributed before a grant of probate (or letters of administration in an intestacy) has been obtained. However, there are some important nuances.

General rule:

The personal representatives, meaning the executors named in a will or the administrators appointed on intestacy, have a legal duty to collect in the estate, pay all debts, liabilities, and taxes, and only then distribute what remains to the beneficiaries. The grant of probate or letters of administration is the document that gives the personal representatives the legal authority to deal with the estate assets. Without it, most asset holders such as banks, investment platforms, land registry, and share registrars will not release funds.

Distributing before the grant carries serious risks for the personal representatives personally. If debts or claims later emerge and the estate has already been paid out, the personal representatives can be held personally liable to creditors and other claimants.

Situations where some money may be released before the grant:

1. Small estate exemptions. Many banks and building societies have their own internal thresholds, often somewhere between 5,000 and 50,000 pounds, below which they may release funds without requiring a grant. Each institution sets its own policy, so this varies.

2. Joint assets. Assets held as joint tenants, such as a joint bank account or a property held as joint tenants, pass automatically by survivorship to the surviving joint owner on death. These do not form part of the estate for distribution purposes and can usually be accessed without a grant.

3. Nominated assets. Certain assets such as some National Savings products allow the holder to nominate a beneficiary. If a valid nomination is in place, the asset holder may pay out up to the relevant limit without a grant.

4. Life insurance and pension death benefits. These are often written in trust or payable at the discretion of the scheme trustees, meaning they fall outside the estate entirely and can be paid out without a grant.

5. Interim payments by the personal representatives. There is nothing technically preventing an executor named in a will from making an interim distribution before the grant if they are confident about the estate's position, but this is highly inadvisable. The executor assumes personal risk for any shortfall if the estate turns out to have insufficient funds to meet debts, taxes, or claims. The protection afforded by section 27 of the Trustee Act 1925, which allows personal representatives to advertise for creditors and distribute after a specified period, only applies after the grant has been obtained.

Practical risks of early distribution:

If the personal representatives distribute too early, they lose the protection of having properly administered the estate. Potential risks include unexpected debts surfacing, inheritance tax calculations proving incorrect, claims under the Inheritance (Provision for Family and Dependants) Act 1975 being brought within six months of the grant, HMRC raising queries about the inheritance tax account, or disputes between beneficiaries arising.

What beneficiaries can do if there is delay:

If a beneficiary is in financial hardship and the estate is straightforward, they could ask the executors to consider making an interim payment on account of their entitlement. This is a matter for the executors' discretion and the beneficiary has no legal right to demand early payment. If an executor is unreasonably delaying the administration of the estate, a beneficiary may in certain circumstances apply to the court for directions or to compel the executor to act, but this is a serious step and usually a last resort.

Summary:

The safe and proper course is to wait until the grant has been issued, debts have been ascertained and paid, any statutory notice period for creditors has expired, and the inheritance tax position is settled before distributing the estate. Early payments are sometimes made in practice, particularly from small accounts or where the estate is very simple, but anyone doing so should be aware of the personal liability they are taking on.

If you have a specific situation in mind, such as a particular asset or a dispute about delay, I am happy to go into more detail.