We recently reported on the significance of Executors taking on personal liability in carrying out their duties as Executor.
We now have another decision to remind us of the importance of this issue.
By way of reminder, when a person makes a will, they appoint one or more Executors. The role of the Executor is to gather in the assets of the estate and to pay off all debts and liabilities and to distribute the estate in accordance with the terms of the will. An Executor must be of sound mind and over the age of 18.
A significant risk for Executors is the payment of any Inheritance Tax (IHT) due to HM Revenue and Customs.
Executors should ensure that any IHT is paid before distribution of the assets of the estate to the beneficiaries.
In a recent case, a beneficiary gave an undertaking (promise) that he would pay the IHT out of his entitlement. It will perhaps not come as a surprise to learn that the beneficiary did not pay the IHT and instead went to Barbados. To make matters worse for the Executor, the beneficiary was not contactable once he had disappeared.
It is the legal responsibility of the Executor to pay the IHT, which in this case amounted to about £340,000. The fact that the Executor did not understand his obligations was no defence.
This risk highlights the importance of considering the appointment of a professional Executor as well as family members or friends. Alternatively, Executors can take professional advice to help them to administer the estate and to ensure that all potential pitfalls are addressed before the estate is distributed.
To discuss this or any other wills and probate related issue, contact us.