Probate granted, but IHT still owed - can I distribute assets ?

parkerc

Hi

I’m in the process of administering a relative’s estate and due to it being all property, which we do not want to sell, we have agreed to the HMRC 10-year payment rules and have been granted probate?

I’m now receiving mixed messages, from an accountant and lawyer about whether I can distribute the assets (property) to the beneficiaries (transfer the land registry title etc.) whilst there is still IHT outstanding to be paid?

Please could someone advise?

And if it is possible to distribute the asset to the beneficiary, who is liable to pay the outstanding IHT (is it me as the executor) ?

xylophone

https://moneyweek.com/489110/beware-executors-are-liable-for-inheritance-tax/

Keep_pedalling

I think you would be bonkers to do this unless, as well as being the executor, you were the sole beneficiary. There is so much that can go wrong here.

If the beneficiaries can’t raise the funds to pay the tax outright the best and safest option is to sell up and distribute the cash.

MumOf2

To answer each question:

1. Yes, you can distribute the estate to the beneficiary/beneficiaries once probate is granted.

2. You as Executor, are liable for the outstanding IHT.

I would approach distribution with extreme caution unless you are both Executor and sole beneficiary.

MumOf2

getmore4less

Edit: see later posts for IHT liability.

If you distribute you need to protect your ability to raise the cash from the property to pay the tax.

Are they all debt free.

There is probably a way keep legal ownership with the estate and beneficial ownership to the beneficiary so they retain future tax liabilities but can have the property sold if they don't cough up the IHT payment each year.

parkerc

Many thanks for all the input, it sounds like whatever I do, I need to ensure we retain enough (of value) within the estate to cover the IHT that’s owed, until either the beneficiaries raise money to pay it off, or we agree to sell the property to do it.

It’s my first time as an executor, but it seems wrong that I’m liable for the IHT payments, not the beneficiaries, especially where there’s a clear assignment within the will for where things go - why on earth doesn’t the IHT follow with the distribution of assets, (and remove me from the equation) surely that would be much easier ?

Here you go, here’s your inheritance and the IHT bill ?!!

getmore4less

Check the IHT manual and relevant legislation

https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm30000

parkerc

Sorry; there is a lot there to go through, is there something specific you think I should focus on ?

getmore4less

https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm30035

getmore4less

xylophone wrote: »

https://moneyweek.com/489110/beware-executors-are-liable-for-inheritance-tax/

The transcript of the case

http://financeandtax.decisions.tribunals.gov.uk//judgmentfiles/j10408/TC06448.pdf

you would need to establish if it is applicable to land and the instalment option.


You should have also already read the relevant section on instalments from IHTM30191 onwards as you have elected for instalments

Keep_pedalling

If you are the sole executor then you have the authority to simply sell the property. In your situation I would simply give the beneficiaries the option to raise the funds to pay the IHT bill, and if they can’t do so put the house on the market.

If they can’t get a loan to do this then it is also likely that they are going to struggle to pay the instalments and interest. This is high risk for you and you don’t want the worry of a default hanging over you for 10 years.

If there are other executors you need to convince them of the risk they are running.