Recent changes at the Probate Registry designed to make it easier to obtain a Grant of Probate may encourage executors to try to deal with the administration of an estate themselves without professional assistance. However, obtaining the Grant is only the first hurdle and not the finishing line and after issue of the Grant there are still traps for the unwary.
The executors will have completed an Inheritance Tax form on applying for the Grant. However, any changes to the estate may still have to be reported to HMRC. There may also be further tax reliefs which can be claimed during the administration period to reduce the amount of any tax paid.
Any gains made on the sale of assets in the administration period may result in a Capital Gains Tax liability. There are ways to mitigate potential CGT lability and these should be carefully considered before the sales are effected.
The executors will need to account to HMRC for tax on gross income received in the administration period and may need to submit tax returns.
Failure by the executors to deal correctly with tax liabilities could result in penalties and additional tax and could leave them personally liable for unpaid tax and open to claims against them by beneficiaries.
Sometimes executors acting without professional help do not understand the terms of the Will, especially where there is a trust in the Will. In the past, it was common to include Nil Rate Band Discretionary Trusts in Wills for tax planning purposes. These trusts may no longer be required, but nevertheless steps need to be taken to either set them up or wind them up. Where this is not done and the omission does not come to light until years later, it is more difficult and costly to resolve the problem and there may be adverse tax consequences.
Executors may make mistakes when distributing the estate. Situations where this may occur include where the beneficiaries are minors, where they have already died, where they are bankrupt, where they are mentally incapable or where they cannot be traced. There are also extra factors to consider when administering the estate where some of the beneficiaries are charities.
Executors will also wish to consider protecting themselves from personal liability in case any debts or liabilities come to light after the estate has been distributed and may wish to delay distributing the estate where there is any likelihood of a claim being made on the estate by a dependant who claims inadequate provision has been made for them in the Will.
For advice on the administration of estates and trusts and other private client matters, please contact Brenda Smyth or any other member of our team on 0117 962 1205, email firstname.lastname@example.org or fill out a contact form.
This article is provided for general information purposes only and represents our understanding of the relevant law and practice as at the date of uploading. This article should not be relied upon as legal advice pertaining to any specific factual situation. Legal decisions should be made only after proper consultation with a legal professional of your choosing.Back to Index