Inheritance tax (IHT)
Executors (where there is a will) and administrators (where there is no will), collectively known as personal representatives, are also responsible for the establishing whether or not inheritance tax (IHT) is payable to HMRC as a result of the person’s death.
Whether inheritance tax needs to be paid can depend on the value of the deceased’s estate, any gifts made in specified periods before the death and the value of any interests in trusts or other estates from which the deceased received a benefit.
Generally, probate will not be granted until some or all of the inheritance tax has been paid so it is very important that personal representatives deal with this aspect as soon as possible. Inheritance tax is charged on estates worth more than £325,000 (2014/15) and generally speaking must be paid within six months of the person’s death. The exception to this is houses and land which usually make up the largest part of an estate. The inheritance tax on such property can be paid in annual instalments until the property is sold. This can however, be complicated to calculate and the outstanding instalments will bear interest.
There is a further complication to inheritance tax. Personal representatives are unable to apply for probate until the inheritance tax (and/or the first instalment of inheritance tax if there is property) has been paid. A solicitor can however, help get around this obstacle.
The duties of the personal representatives cannot be taken lightly. They are entrusted to deal with large sums of money and have an obligation to discharge all debts, taxes and liabilities which the deceased had. If anything goes wrong, the personal representatives are legally responsible. This is why so many people ask a solicitor to administer the estate on their behalf.
The probate process comprises numerous tax reliefs and allowances to correctly calculate the amount of inheritance tax that may be due. An experienced professional knows how these operate to minimise the amount of inheritance tax payable.
For anything further, one of our specialists would be delighted to meet you either in our office or in your own home to talk through your requirements and answer any questions. Please contact us at any time.