The Duty of an Executor to Pay Inheritance Tax a cautionary tale

Most people will be aware that if Inheritance Tax is payable in an estate, then the Executors have to arrange payment.

However, not everybody appreciates that an Executor is personally liable to pay the Inheritance Tax in an estate.

HMRC require the Executors, or Administrators, of an estate to report accurately, all the assets and liabilities of the estate as at the date of death.  

What is not always appreciated, is that the Executors/Administrators are under a personal liability to pay Inheritance Tax.  Therefore, if an Executor/Administrator has distributed an estate before obtaining clearance for Inheritance Tax from HMRC, and HMRC later advise that there is further tax to be paid, then the Executor/Administrator will have to pay the Inheritance Tax personally unless he or she can recover it from the beneficiaries.

In the case of Harris v HMRC [2018] UKFTT 0204 (TCC), Mr Harris acted as Administrator of the estate of the late Helena McDonald.  The deceased’s home was sold and Mr Harris passed the entire proceeds of sale to one of the beneficiaries, on the understanding that that beneficiary would pay the estate’s bills and taxes. 

Unfortunately, the beneficiary failed to do so, and returned to his home overseas.  HMRC then demanded the Inheritance Tax from Mr Harris and the Tribunal Judge rejected Mr Harris’ appeal that he no longer had the money.

Regrettably for Mr Harris, had he tried to pursue the beneficiary for reimbursement, to add insult to injury that task would have been made more difficult by the fact that the beneficiary was now out of the jurisdiction. 

This is a sobering tale which reflects the huge responsibility which a lay person accepts when agreeing to act as Executor/Administrator.

Here at Barrett & Co we are always happy to advise Executors/Administrators on their duties and to assist them in the calculation and settlement of any Inheritance Tax payable.  An Executor or Administrator’s legal fees are properly and correctly payable from the estate and beneficiaries cannot criticise them for taking legal advice.  After all, it is in the interests of both Executors/Administrators and beneficiaries that the estate is distributed correctly and all Inheritance Tax paid.

If you would like any further advice as to your duties or your personal liabilities in respect to a role which you have undertaken, please contact Hilary Buckle or Jane Whitfield on 0118 958 9711.

Further Reading:

Reynolds Report may 2020 Part 1

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Get in touch

Hilary Buckle offers a fixed fee initial meeting of one hour to discuss your personal circumstances, your options and your next steps, at a cost of £95 (inc VAT).

Hilary specialises in all aspects of private client work, including Wills, trusts and probate matters. She is a member of the Thames Valley branch of the Society of Trust and Estate Practitioners, Solicitors for the Elderly (SFE) and an associate member of ACTAPS (the Association of Contentious Trust and Probate Specialists).

If you would like to know more or arrange a fixed fee appointment, please email her at [email protected] or call her on 0118 958 9711.

"barrettandco" and "Barrett & Co" are trading names of Barrett & Co Solicitors LLP, a Limited Liability Partnership incorporated in England and Wales under registration number OC356263, with registered office at Salisbury House, 54 Queens Road, Reading, Berkshire RG1 4AZ. Barrett & Co Solicitors LLP is authorised and regulated by the Solicitors Regulation Authority (SRA Number 549694).

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