Beneficiary Lands Executor With Massive Tax Bill

Diane Matthews Watson Ramsbottom Solicitors
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25th July 2018
Pre-Nup Upheld When Implications Understood
27th July 2018

Charlotte Ledson Watson Ramsbottom SolicitorsCharlotte Ledson, a solicitor in our wills and probate team at Watson Ramsbottom looks at a recent case outlining the peril for executors of acting without due care and the benefit of professional advice.

When the executor of an estate accepted an undertaking from the beneficiary that he would pay the Inheritance Tax (IHT) bill and released the estate assets to him, the result was a disaster.

Under UK law, the executors of an estate must pay any IHT due before it can be formally probated and in almost all circumstances are personally liable for the payment.

In the case in point, a man (Mr Harris) was appointed the administrator of an estate worth more than £1 million. The IHT payable on the estate was £340,000. He relied on a promise by the beneficiary that he would pay the bill, so did not retain funds to make the payment.

The beneficiary then travelled to Barbados without settling the account. When HM Revenue and Customs (HMRC) sought payment of the IHT due, the executor was unable to make it.

Although he appealed against HMRC’s tax assessment, the First-tier Tribunal concluded that ‘it is no defence to any inheritance tax determination that Mr Harris may have transferred the assets of the estate to a beneficiary on the basis that the beneficiary would be responsible for payment of the inheritance tax due. Nor is it a defence that Mr Harris was ignorant of his obligations, as a personal representative, to pay the inheritance tax owing.’

Charlotte Ledson, a solicitor in our wills and probate team at Watson Ramsbottom comments “When executors are faced with eager beneficiaries, the pressure put on them can be considerable and they may be tempted to proceed without ‘dotting the i’s and crossing the t’s’, which can have very unfortunate consequences for them.”

The appointment of a professional as executor of your estate not only ensures that the administration will be dealt with properly and promptly, but also that errors such as this will be prevented.

For help about any issues relating to this article, please contact Charlotte Ledson,  a solicitor in our wills and probate team at Watson Ramsbottom on 01254 88 44 22 or complete our online enquiry form discuss your concerns with one of our team of expert advisors.