Can you afford not to take advice in administering an estate?

The government is increasingly aiming to make the probate process easier for individuals to deal with by themselves, but a recent case illustrates the danger faced by Executors who choose not to take professional advice.

When Helena McDonald died without a Will, Glynne Harris applied to the Court to act as her personal representative and was duly appointed. The estate was valued at £1.2 million, and most of the Inheritance Tax liability qualified for payment by instalments. Mr Harris distributed the estate to the beneficiaries, on the understanding that the main beneficiary would take settle the remaining £341,278.76 of tax as it became due over the next ten years.

Unfortunately for Mr Harris, the beneficiary then disappeared to Barbados, without paying any of the outstanding tax.

Mr Harris was then left in the position of being personally liable for the full £341,278.76 tax bill, without having any assets left in the estate with which to meet this bill. He was therefore required to pay the tax from his own funds.

Mr Harris appealed HMRC’s request for the outstanding tax, but this was rejected by Judge Nicolas Aleksander, who confirmed that it was the personal representatives of an estate (i.e. the Executors, or Administrators) who are obliged to pay the estate’s Inheritance Tax bill.

“It is no defence to any Inheritance Tax determination that Mr Harris may have transferred the assets of the estate to a beneficiary on the basis that the beneficiary would be responsible for the payment of the Inheritance Tax due,” said Judge Aleksander. “Nor is it a defence that Mr Harris was ignorant of his obligations, as a personal representative, to pay the Inheritance Tax owing.”

The case makes clear that when it comes to monies owed to HMRC, ignorance of the law will be no excuse for a personal representative. Had Mr Harris taken proper legal advice in the administration of the estate, he would have been told not to distribute the whole of the estate until the tax had been fully paid, and so would not have been left £341,278.76 out of pocket.

Even aside from tax, the process of administering an estate is full of traps for the unwary, of which many personal representatives acting on their own would be entirely unaware. While parts of the procedure may have been simplified, with the possibility now of supplying details to HMRC and applying for probate online, Executors and Administrators should not be lulled into a false sense of security. Taking legal advice will always be the safest option, and the costs of this can be paid from the estate.

If you would like assistance with the administration of the estate, the probate specialists at Ashtons take a flexible approach and will be happy to provide as much or as little help as you require. Please get in touch with Ashtons Probate Team today to discuss how we can assist you.