11 June 2017

Call for changes to inheritance tax rules as executors face paying IHT bills from their own pocket – Helen Morrissey, Royal London

6 min read

 
Helen Morrissey, Personal Finance Specialist

Helen Morrissey

Corporate PR Specialist – Long Term Savings

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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


Asset type

£m
Securities 5790
Cash 3752
Insurance policies 543
UK residential buildings 7040
Other buildings and land 932
Loans and Other assets 1286
Total gross capital value 19344
   
Liability type  
Mortgages 199

Other debts and funeral expenses

 

411

   
Total net capital value 18733