Q&A - Could an Executor of a Will be liable to pay IHT if Probate is delayed?

Q:  A friend is rewriting her Will and has asked if I will be an Executor with her brother, who frankly is unreliable and can be awkward. I am concerned as I have heard an executor can be liable for paying Inheritance Tax if there are problems sorting out the Will that cause a delay with getting Probate.

A:  Inheritance Tax (IHT) is not payable on all estates; it depends on its value and the nature of the assets concerned.  Where IHT is payable, it must be paid to HMRC in advance of Probate which can pose a problem for those estates which are asset rich but cash poor, as the executors often cannot access funds without Probate. To obtain Probate, a stamped receipt from HMRC must be submitted with the application for Probate. 

Paying IHT liabilities on time is important as HMRC charge interest on any unpaid tax after the end of the sixth month following the date of death. Most commonly payment is made using the ‘Direct Payment Scheme’ adopted by many banks and financial institutions. This method can, however, only be used if an account is in the sole name of the deceased, in which case money can be paid directly from the Estate funds to HMRC before Probate is granted. The deceased’s bank will tell you what information and paperwork they need for the transfer.

If the deceased’s Estate includes land, or certain shares or holdings, you can sometimes arrange to pay the IHT on those assets by instalments. Executors themselves are not liable to pay IHT from their own funds, but sometimes it is necessary for them to apply for an “Executor’s Loan” if access to estate funds is not possible. Being an Executor can be simple, or it can be complex – which is why many people choose to appoint a solicitor as their Executor rather than burden a loved one.

Article 09/12/2019

Ulia Choudhry

Ulia Choudhry

Solicitor

Part of our Probate, Wills, Tax and Trusts team in Wrexham

Victoria Wilson

Victoria Wilson

Partner

A Partner and Head of our Probate, Wills, Trusts and Tax team