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Testamentary Expenses

Also known as: Administration Expenses, Probate Costs

Definition

Testamentary expenses are the costs incurred by executors when administering an estate, including probate fees, professional fees, and other reasonable expenses necessary to collect assets, pay debts, and distribute inheritances.

Understanding these costs helps executors know what they can reclaim from the estate and helps beneficiaries understand why estates take months to settle and why inheritances may be reduced by administration costs.

What Does Testamentary Expenses Mean?

Under the Administration of Estates Act 1925, testamentary expenses (also called administration expenses) are all costs properly incurred by personal representatives—executors or administrators—in carrying out their legal duties. These expenses cover the entire period from death through to final distribution to beneficiaries, typically spanning 9-12 months for straightforward estates. Case law establishes that expenses must be "attendant on the proper performance" of executor duties, meaning they must be necessary and reasonable for administering the estate effectively.

Testamentary expenses include probate court fees (£300 for estates over £5,000 as of May 2024), professional fees for solicitors and accountants (typically £2,000-£5,000 for straightforward estates), property and asset valuations (£200-£500 per property), and ongoing property costs like insurance and utilities during administration. Executors can also reclaim out-of-pocket expenses including postage, phone calls, travel to estate appointments, and statutory advertisements in The Gazette to protect against unknown creditors under the Trustee Act 1925. For example, Emma administered her father's £450,000 estate and incurred £8,305 in testamentary expenses: £300 probate fee, £2,500 solicitor fees, £450 property valuation, £4,200 estate agent fees, £680 property insurance, and £175 in postage and travel costs.

Crucially, most testamentary expenses are not deductible for inheritance tax purposes—only reasonable funeral expenses can be deducted under the Inheritance Tax Act 1984 Section 172. This surprises many people who assume all estate costs reduce the tax bill. While testamentary expenses must be paid from the estate, they're calculated after IHT is determined, so they reduce what beneficiaries ultimately receive but not the tax owed. Under Section 34 of the Administration of Estates Act 1925, testamentary expenses rank second in payment priority after secured debts and funeral expenses, but before unsecured debts and legacies. This priority protects executors from being left out of pocket when estates have limited funds.

Common Questions

"Are testamentary expenses deductible for inheritance tax?" Most testamentary expenses are not deductible for inheritance tax purposes. HMRC only allows reasonable funeral expenses to be deducted from the estate value when calculating inheritance tax. Other administration costs like probate fees and solicitor fees must be paid from the estate but do not reduce the taxable value.

"Who pays testamentary expenses if the estate has no money?" If the estate lacks liquid funds to pay testamentary expenses, the executor may need to pay costs upfront and reclaim them once estate assets are liquidated. Alternatively, some solicitors offer deferred payment arrangements where fees are settled from estate proceeds after probate is granted. In rare cases where the estate is insolvent, expenses may not be fully recoverable.

"Can executors charge for their time as a testamentary expense?" Lay executors (non-professionals) cannot charge for their time unless the will explicitly authorises payment. However, they can reclaim reasonable out-of-pocket expenses like travel, postage, and phone calls. Professional executors (solicitors, banks) can charge fees for estate administration as agreed in their appointment or fee schedule.

Common Misconceptions

Myth: All testamentary expenses reduce the inheritance tax bill

Reality: Most testamentary expenses do not reduce inheritance tax. Only reasonable funeral expenses (burial, cremation, funeral service, memorial) are deductible under the Inheritance Tax Act 1984 Section 172. Probate fees, solicitor fees, and other administration costs are paid from the estate after IHT is calculated, so they reduce what beneficiaries receive but not the IHT liability itself.

Myth: Executors can't claim anything—they have to do it all for free

Reality: While lay executors cannot charge for their time unless the will authorizes payment, they are entitled to reclaim all reasonable out-of-pocket expenses. This includes travel costs, postage, phone calls, professional advice they obtain, and even meals when traveling on estate business. Executors should never be financially disadvantaged by accepting the role. Professional executors like solicitors or banks can charge professional fees as agreed.

  • Probate Fees: The court charges for obtaining a grant of probate, which are a specific type of testamentary expense (currently £300 for estates over £5,000).
  • Funeral Expenses: Estate costs that have higher payment priority than testamentary expenses and are deductible for inheritance tax purposes.
  • Estate Liabilities: The broader category that includes testamentary expenses, funeral expenses, and debts owed by the deceased.
  • Executor: The person who incurs testamentary expenses and has legal authority to pay them from estate funds.
  • Estate Administration: The overall process during which testamentary expenses are incurred, from death to final distribution.

Need Help with Your Will?

Understanding testamentary expenses helps you make informed decisions about executor appointments and set realistic expectations for beneficiaries. Knowing these costs means you can choose executors wisely and explain why estates take time to settle.

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Legal Disclaimer:

This article provides general information only and does not constitute legal or financial advice. WUHLD is not a law firm and does not provide legal advice. Laws and guidance change and their application depends on your circumstances. For advice about your situation, consult a qualified solicitor or regulated professional. Unless stated otherwise, information relates to England and Wales.