Inheritance Tax Wasn't Divided Between Beneficiaries Correctly? 30 July at 5:12PM edited 30 July at 5:31PM in Deaths, Funerals & Probate 12 replies 881 views

FreshFruit

I'll try and keep this straightforward. 

Person unfortunately passed and left a property portfolio to 3 beneficiaries (2 executers, person a & b). Their will stated something along the lines of 'all my assets shall be considered as 100 shares and 60 will go to person a, 20 to b and 20 to c'. 

The properties were considered at the value they were bought at many years prior. Person b & c took a couple properties, swiftly sold them and moved on - leaving person 'a' with the inheritance tax. I believe they took slightly more than their share and paid no inheritance tax, person 'a' wasn't receiving the best advice and trusted b & c. 

The tax was agreed to be paid off over 10years (with interest) with income from the remaining properties solely by person 'a'.

A couple years later the HMRC decided that the inheritance tax wasn't calculated correctly to begin with and revalued the estate (I'm unsure if they calculated the sold properties that b&c took). They doubled the inheritance tax and wanted missed payments back with interest in a short time, causing person 'a' to remortgage one of the properties. 

I hope it's somewhat clear what happened here, two people took a bigger share than they should have and contributed nothing to the inheritance tax. I was discussing this with somebody today and they were fuming, they said I should advice person 'a' to calculate how much they lost out on and pursue person b&c. This all started 10 years ago and the last of the tax has just been paid, is it too late? 

FreshFruit

Sorry can I just clarify that the HMRC recalculate the inheritance tax about 3-4 years into the 10year payment plan. 

JGB1955

I always assumed that the estate couldn't/shouldn't be distributed before IHT was paid...

Mickey666

Who was the executor(s)?

FreshFruit

JGB1955 said:

I always assumed that the estate couldn't/shouldn't be distributed before IHT was paid...

That's what I thought too, however instead of a lump sum being paid it was agreed that the tax would be paid over 10years, during which b&c claimed some of the best properties, held onto them for a short time and then sold up and basically vanished. 

I think person a was told that they should run the remaining properties as a business and they would have more than enough to pay the tax as income, person a had no experience in property, or handling large amounts of money, or taxes, thus I think they were sold a pack of lies by b&c. 

FreshFruit

Mickey666 said:

Who was the executor(s)?

A little confusing, person a was an executor and a beneficiary, and person b (was actually two people, both were an executor and beneficiary) 
Person c was a beneficiary only. 

So 3 executers, two of which have since stepped down (very recently) 

Edit: so even though person a had the biggest share, they felt outnumbered as 'b' had two executors, therefore they felt they would be automatically overuled if they spoke up

Savvy_Sue

FreshFruit said:

Mickey666 said:

Who was the executor(s)?

A little confusing, person a was an executor and a beneficiary, and person b (was actually two people, both were an executor and beneficiary) 
Person c was a beneficiary only. 

So 3 executers, two of which have since stepped down (very recently) 

Edit: so even though person a had the biggest share, they felt outnumbered as 'b' had two executors, therefore they felt they would be automatically overuled if they spoke up

This makes no sense at all to me. 

Do we have 

• Andy, executor and beneficiary, left 60%
• Benny and Brenda, both executors and beneficiaries, left 20% between them, ie 10% each
• Chris, beneficiary, left 20%?

Thus actually 4 people in total?

What Andy has to consider is whether he's likely to get anywhere if he DOES decide to pursue this, especially given that you say Benny, Brenda and Chris have 'vanished' - and there is a part of me which feels that if he felt out of his depth, it was always open to him to get proper professional advice. And does he have any interest in maintaining any kind of relationship with Benny, Brenda and Chris in the future? 

Also you say 2 executors have stepped down very recently - but from what? If they'd divided the properties and settled the tax, what was there left to do? 

FreshFruit

Hi,
I tried to simplify it somewhat which may have, ironically, led to more questions. 

But yes, let's say it was 60:20:20, one of the 20 has two executors/beneficiaries and is two people, the other 20 is only a beneficiary.
The portion of the 60% was supposed to be split further once two other beneficiaries hit a certain age (children of 'a') (sorry this is confusing) so the two executors hung around but now the time is coming to further split the remains, the two executors from party 'b' have said they are stepping down (in their words, as to not interfere)

Marcon

FreshFruit said:

Hi,
I tried to simplify it somewhat which may have, ironically, led to more questions. 

But yes, let's say it was 60:20:20, one of the 20 has two executors/beneficiaries and is two people, the other 20 is only a beneficiary.
The portion of the 60% was supposed to be split further once two other beneficiaries hit a certain age (children of 'a') (sorry this is confusing) so the two executors hung around but now the time is coming to further split the remains, the two executors from party 'b' have said they are stepping down (in their words, as to not interfere)

You're right. It's hopelessly confusing. Tell them to get some professional advice and make sure all the facts are readily available.

getmore4less

The properties were considered at the value they were bought at many years prior.

That's the first red flag,  

A as executor failed to value the estate properly.

Keep_pedalling

Executors can not walk away, they are the people responsible for paying IHT. Sounds like they did not even get the properties valued, so they should brace themselves for an HMRC investigation at some point.