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Legal News | 28.06.18

Executor on the Hook

A recent case in the First Tier Tax Tribunal is attracting attention in the press. Under images of a tropical paradise unfolds the story of a personal representative who may be left personally out of pocket to the tune of £340,000 after a beneficiary left the country for Barbados with the estate’s funds.

Mr Harris was appointed as the personal representative of Mrs McDonald’s estate as she had not made a Will. As such he was responsible for collecting in the assets, paying the inheritance tax (IHT) bill and subsequently distributing her estate. However, Mr Harris released the majority of estate funds to a single beneficiary, Mr Harewood, before paying the balance of IHT due. He said this had been on the understanding that Mr Harewood would discharge the estate’s bills and taxes. However, Mr Harewood returned to his home country of Barbados, leaving behind a large tax bill and becoming impossible to contact.

The Revenue took the view that, as the personal representative of an estate, Mr Harris was responsible for the outstanding IHT due even though he had no funds left to pay. Upon Mr Harris’ appeal to the Tribunal, Judge Nicholas Aleksander stated “IHT is clear… it is no defence that Mr Harris may have transferred the assets of the estate… on the basis that the beneficiary would be responsible for payment of the IHT due… nor is it a defence that Mr Harris was ignorant of his obligations, as a personal representative, to pay the IHT owing.”

Whilst this situation is very rare, it is important that executors or administrators understand their duties. It is not just the Revenue who may look to an executor or administrator for outstanding sums; other creditors may also claim payment even after an estate has been distributed.

Although it may feel like an honour to be trusted to act as a personal representative, it can be an onerous task. We would recommend that professional advice should always be taken particularly with a large or complex estate like that of Mrs McDonald. There are steps that can be taken to minimise the risks including making full enquiries, obtaining tax clearance before making final distributions and advertising for creditors. We can guide you through the process and the cost of taking this advice can usually be deducted from the estate.

For more information about selecting or acting as a personal representative, speak to your usual contact at Wansbroughs on 01380 733300 or contact us at wealth@wansbroughs.com.


Posted By Our Wills, Tax, Trusts & Probate Team