People agreeing to act as executors to the estates of family and friends have been warned they may face paying inheritance tax bills out of their own pockets due to delays in sorting out the finances of an estate, especially where property is involved.
The warning comes from Royal London which has undertaken research into financial issues that arise when someone dies. Royal London is calling for a change in the rules so that HMRC allow more time to pay IHT bills where a complex estate is being wound up.
Under current rules, the executor of a will gains the legal right to administer someone’s estate after death by obtaining ‘probate’. The process includes valuing the estate, paying any debts or taxes and then sharing out the remainder of the estate in accordance with the deceased’s wishes. However, many larger estates are complex and it can take a long time to sell assets. The Table is based on HMRC statistics for 2013/14 and covers all estates on which inheritance tax was paid. It highlights the fact that larger estates are likely to include a range of different assets which may need to be disposed of and may also have mortgages and other outstanding debts which need to be paid off before the process is completed.
Estates passing on death in 2013-2014: Assets and liabilities by amount of tax due
Assets (£m) – Excludes estates with nil IHT liability
|UK residential buildings||7040|
|Other buildings and land||932|
|Loans and Other assets||1286|
|Total gross capital value||19344|
Other debts and funeral expenses
|Total net capital value||18733|