Legal News | 7.05.20

Private Client Update

You can DIY… but with estate administration, why would you?

DIY stores may have reopened but estate administration is still one thing you may prefer not to do yourself. Here are just a few of the ways in which Wansbroughs is able to help.

Executors’ Personal Responsibility

If you are appointed as an executor, you will be personally liable for administering the deceased’s estate correctly. This means that before you distribute the estate under the terms of the Will of the deceased, you must pay the correct amount of inheritance tax (IHT), capital gains tax (CGT) and income tax owed by the estate. You must also ensure you are aware of and pay all debts owed by the deceased. If you distribute the estate to the beneficiaries and then discover the estate owes HMRC or a creditor, you as executor might have to settle the outstanding tax or debt from your own personal funds. Wansbroughs can help you to understand your duty and protect you against such liability.

Calculating inheritance tax

In order to meet your responsibilities as executor to HMRC in respect of any IHT liability, the assets and liabilities of the deceased must be accurately valued. In addition, as executor it is also your responsibility to find out whether the deceased made any gifts, including to any trusts, prior to their death which must be brought into account for IHT. You also need to discover whether the deceased was the beneficiary of any trusts, which, again, might affect the IHT position.

Having gathered the values of the assets, liabilities and gifts of the deceased, there are many exemptions and reliefs from inheritance tax, each with their own rules. From the spouse and charity exemptions to the lesser known business and agricultural property reliefs and the recently announced exemption for NHS workers who die as a result of COVID-19, Wansbroughs can help you claim all the exemptions and reliefs to which an estate might be entitled.

Wansbroughs can also help ensure that an estate benefits from all available nil rate bands, including those that are transferable from a predeceased spouse and the notoriously complex residence nil rate band. In certain circumstances, this latter nil rate band may be available even though the deceased did not own a property, having downsized prior to their death.

Additionally, HM Revenue and Customs’ initial calculation of the inheritance tax that is due on an estate is not the end of the matter. Relief is available where certain types of asset are sold within specific periods following the deceased’s date of death for less than their value at death, or where costs are incurred in realising assets situated abroad. Wansbroughs can help you claim these reliefs and any refund of inheritance tax that is due as a result.

Paying inheritance tax

Generally, inheritance tax is due six months after the end of the month of death; however, tax attributable to certain types of asset may instead, if you are willing to pay an additional interest charge, be paid in up to ten equal, annual instalments. Failure to pay by the deadline can result in additional interest and penalties falling due. Wansbroughs can help you to settle inheritance tax from the estate on time.

Capital gains and income tax

Executors must report any capital gains realised or income received during the estate administration. For some estates, this may be done informally; however, for more complex estates, registration with HM Revenue and Customs’ Trust Registration Service and formal tax returns will be required. In either case, Wansbroughs can help with your reporting obligations.