Discovering lifetime gifts: duty of an executot

Cymro52

I agreed to be the sole executor of a good friend's will, and he has now died. His known estate will exceed the £325,000 threshold for IHT liability by £100,000 or so. He had no close relatives and he has left his estate to a number of friends and also to quite a number of people in Ghana, Kenya and Uganda and elsewhere, whom he very generously supported financially in his lifetime when they were undergoing education and early careers. In total these gifts must have been substantial, several thousand pounds each year for a number of years. They will reduce the "nil IHT band" (£325,000) and therefore affect the IHT payable by the estate. His record keeping, alas, has not been very thorough and I know that he used Moneygram to make regular transfers of money, by paying cash at the relevant offices/agencies, but I can only find receipts for a handful of transactions. As executor I believe I have the personal legal responsibility of establishing what gifts he has made during the last 7 years, and when. The few Moneygram receipts I have show that, each time, he had to record his full name, address, date of birth and place of birth as well as details of the recipient.  But there was no "account number" to link them and so I can't believe that Moneygram would somehow have a record of payments under his name if I asked them. Does anybody know whether agencies such as Moneygram are required to report each transaction to HMRC who may open some sort of potential IHT "file" on the individual which would show all the transactions, and which might be disclosed to an executor or used to verify the IHT account required with the probate application? (Otherwise why is the personal information of the sender required to be given each time? It is more than the recipient would need to know.) If HMRC do not keep files, how do they verify the information that executors record for lifetime gifts, and what would they expect me to do to obtain all the "missing" information?

Malthusian

The best advice would be to renounce the executorship, before you have started the job, and let one of the beneficiaries deal with it. Assuming you aren't one yourself.

If you are a beneficiary I would speak to an SRA-registered solicitor. The cost would come out of the estate. Not using a solicitor would put all the liability on your own head for the sake of slightly boosting everyone else's inheritances, which would be highly inequitable.

You would be liable if you overpaid IHT due to overestimating the amount taxable (e.g. assuming that a gift was subject to IHT when actually it was charitable) and liable if you underpaid it.

In total these gifts must have been substantial, several thousand pounds each year for a number of years.

Gifts of up to £3,000 are exempt from IHT. Gifts out of surplus regular income that do not affect your standard of living are also free of IHT. And gifts to charity are exempt from IHT. Any chance that the total of "several thousand pounds each year" is covered by these allowances? (If the answer is "yes" it won't necessarily help you with record-keeping, as charitable gifts and gifts out of regular income still need to be declared on the IHT forms.)

I don't know how much information Moneygram passes to HMRC but I do know that it doesn't matter, because ignoring failed PETs and hoping that you get away with it would be daft. Again, you would be taking on all the liability for the sake of slightly boosting everyone else's inheritances.

*edit* Just for completeness - the £3,000 allowance can be carried forward one tax year if unused, which may or may not be useful depending on the amounts / timings involved.

Malthusian

Given he had to provide his full name and date of birth to Moneygram for every transaction, there is no reason they could not send you a full list of transactions under that name and DOB if you asked them for it, in your capacity as executor of his estate. Financial companies are required to keep records for at least five years (sometimes longer), and practically speaking there is no reason they should not have records going back 7 years.

(If he made any Chargeable Lifetime Transfers in the last 14 years you may need records going back to then, but that's unlikely to be the case for a few thousand pounds gifted to friends and charities here and there.)

Cymro52

Thanks for the input, Malthusian. I think that I have some moral commitment to my old friend, given that he specifically asked me to be his executor, so I would feel bad about renouncing probate. I seem to have given the impression that I was proposing to somehow suppress the Moneygram transfers from the IHT account, hoping that HMRC would not notice, but in fact I was exploring the possibility that they might do the otherwise difficult (perhaps impossible) task for me if I disclosed the problem: if they do have records of all the transfers, it would solve the problem instantly if they would release them. If this were the case I think I could handle the estate administration (including the possible IHT "gifts out of income" exemption) without a lawyer, given that the remainder of his assets won't present any substantial problems. I appear to need to make enquiries of HMRC and Moneygram. I wondered if anybody had experienced a similar situation and how they managed it.

xylophone

duty of an executot

Baby faced?

Your friend would smile?

Malthusian

Cymro52 said:

Thanks for the input, Malthusian. I think that I have some moral commitment to my old friend, given that he specifically asked me to be his executor, so I would feel bad about renouncing probate.

If he was your friend he wouldn't want you to take on a potentially ruinous liability without any compensation, and if he wouldn't care about your position you owe him nothing.

Some people have this weird idea that appointing someone as your executor is some kind of honour. The reality is that it is no different to asking one of your friends to wash your car for free. Except that washing someone's car is much less of an imposition as it doesn't come with a potentially ruinous liability.

This does not apply if the executor is also a beneficiary, because then they have an interest in seeing the estate distributed efficiently.

I am surprised that you aren't a beneficiary given your friend left his estate to various friends (you haven't confirmed one way or the other).

You can avoid renouncing (fulfilling your moral scruples) and also avoid taking on the liability, and the hassle of tracking down beneficiaries, etc, by employing a solicitor.

Moneygram certainly should have records of all transactions under his name, at least for the relevant period, and in your capacity as executor you are entitled to receive all those details just as if you were your friend. If they get awkward, make a Subject Access Request.

Cymro52

Thanks again. Yes I am a beneficiary but at my request (because I don't need it) he limited it to a fixed legacy of £250 not a share in the residue. But I am not following why the employment of a solicitor would somehow absolve me of legal liability. If the solicitor's advice is incorrect, that will not make me immune from legal action (or will it?). What would protect me, I think, is a certificate from HMRC stating that the correct amount of IHT has been paid, and that would mean I (or the solicitor acting for me) must provide the information I have been writing about, so it is all a bit of a circular argument. I think I must write to Moneygram to see if they agree that they can and will provide the information, and if they say "no" write to HMRC to get advice as to how to proceed. I can't be the first person to be in such a position. Meanwhile if anyone reading this topic can describe any similar experience they have had and how it was resolved, that will help.

xylophone

You seem determined to  take on administration of the estate in accordance with your friend's last wishes. You  do have the choice of employing a solicitor  to complete all the necessary forms and actually apply for probate. The estate (not you personally) would pay his fees. 
This can mean hours of work ( I speak from relative's recent experience) so those fees can be quite substantial. In respect of establishing gifts from income, relative tells me that he had to trawl fourteen years of financial records to establish the facts.
You would supply  the solicitor with all the information you have in respect of the assets of the deceased and of the liabilities outstanding at death. You would also provide details of his income and outgoings - his bank statements  would be helpful in establishing these sums.

You would explain that you are aware that the deceased made substantial gifts in the years before his death and give the solicitor such details as you have.

It would then be down to the solicitor ( or more likely his clerk) to do the legwork.

Cymro52

Thanks to both Malthusian and Xylophone for taking the time and trouble to respond.  Malthusian was right that Moneygram will, for a fee, provide transaction history for up to 10 years (I am not being allowed to post links but a google search "Historical Request Form Instructions - MoneyGram" will show the form.)
The notes to the form say that "third party requests" need to be accompanied by a "Power of Attorney" so I need to find out what that means in the context of an executor seeking information about the deceased's transactions (if they mean the grant of probate, I am going to be in a Catch-22 situation because as far as I can discover, IHT needs to be assessed and paid before probate can be granted, but I presume there is some way round that conundrum). If that procedure works I think I will try to manage without a solicitor but of course I will hand things over to one if I get into difficulties. I don't think that there will be any "gift out of income" exemptions as his income was quite low for over 7 years and he must have made his gifts out of capital which he had saved/inherited, so the probate procedure should be quite straightforward if HMRC can accommodate the Moneygram history situation somehow.
(I am only posting this information in case it might help someone else sometime.)

xylophone

The notes to the form say that "third party requests" need to be accompanied by a "Power of Attorney"

Even had you been Attorney for your friend, this would have ceased on death. 

It is the executor who becomes responsible for dealing with matters relating to the estate.

As executor, you have responsibility for declaring the state of affairs on the IHT forms - clearly you must obtain the information before applying for probate.

 You should attach to the Request form  a copy of the death certificate and the Will naming you as executor.

nom_de_plume

Was he ever married and, if so, did his wife die whilst they were still married?