Dealing with Inheritance Tax as an executor of a will
November 16, 2022
If you are appointed the executor of a will, it is your legal responsibility to gather all the assets of the deceased, pay the tax by the required deadlines and then distribute the estate correctly to the beneficiaries.
One of the most complicated aspects of the process is ensuring you pay the right amount of Inheritance Tax within the six-month deadline. It is an executor’s job to value all the assets and debts of the deceased and work out how much tax needs to be paid. This is also dependent on how many gifts the deceased made in the previous seven years.
You should also ensure you claim all the exemptions and reliefs available to keep the amount owed to a minimum. In some cases, where the deceased’s spouse or civil partner has previously passed away, a claim may be made to transfer any unused percentage of the Inheritance Tax nil rate band to the surviving spouse or civil partner’s estate. This could substantially reduce the amount of Inheritance Tax owed.
Ensuring the Inheritance Tax declaration is correct is imperative. Underpaying could result in you having to personally pay the difference to HMRC years later. If you overpay or incur penalties for late payment, you are personally liable to reimburse any beneficiaries who are short-changed.
While six months may seem like a long time, it soon passes when you need to clarify details, locate documents, and arrange for the funds to pay the required amounts. For example, if there is a liability for inheritance tax, you will need to arrange to pay it before you apply for the grant of probate and raising the money for this can be tricky if there is not enough cash in bank accounts. This is why it’s important to start the process as quickly as possible.
Inheritance Tax on the deceased’s house can be paid in 10 annual installments, but the full amount must be paid when the property is sold.
Get further useful advice in our free guide for executors.
The information contained in this article is intended for general guidance only. It provides useful information but it is not a substitute for obtaining legal advice as the articles do not take into account specific circumstances. So do please Contact US for legal advice on the issues raised.