Winding up estate HMRC chasing money but none left

rose28454

My brother died 2 years ago and my sisters and I have been winding up his estate ( youngest sister is executor and we are helping with paperwork etc as she has no patience with it )

He was midst divorce although still legally married and he left his estate to his daughter There was a property with a large mortgage and the wife is living there and daughter too when she’s home from uni.

The net probate figure includes the property equity so basically that is the only asset and HMRC is chasing a £32000 debt for his tax before he died.

HMRC are asking for assets and liabilities list ( fine ) but question is could they force sale of the property to clear that debt?

elsien

in general terms, yes. Debts have to be paid before beneficiaries receive anything.

However how was the house owned between him and his wife - had they got as far as a financial consent order and does she have part ownership of it as well?

How much equity is there in the property?

rose28454

The house was held as tenants in common, it had been held as joint tenants but her solicitor applied for a change the year before he died. Had she not the wife would have inherited it all which is hilarious ( can you tell how much I dislike my sister in law )

The house is worth about 450000 with a mortgage of 250000 ( interest only )

They did a financial settlement on a Friday he was admitted to hospital on the Saturday and was dead 10 days later so the divorce was not finalised.

He had health problems but he basically was destroyed by the divorce negotiations as she would not negotiate and I think once he had finally negotiated it his body gave up.

There was a limited company that he owned that I took over as a director in order to liquidate it that was basically bankrupt and is gone

There was also a partnership with the wife that had been wound up and produced a small profit 23k that has been used to pay debts

Basically the only asset is the house so would the tax man expect that to be sold.

p00hsticks

When you say there was a partnership with the wife that was wound up, was this before of after his death ?

How was the £23k profit apportioned across what debts ? I susect HMRC may take a dim view of none of this going to them……

Keep_pedalling

Was the tax his personal tax or company tax?

saajan_12

Ultimately if the estate has (any) assets then the debts would need to be paid. There's a question on how thats done, but the fact that assets are not liquid doesn't stop HMRC getting their money eventually.

Given that eventual conclusion, it may be preferable to increase the mortgage on the property and pay off HMRC to avoid any costs from forced sales.

rose28454

https://forums.moneysavingexpert.com/discussion/comment/81947416#Comment_81947416

It was wound up after his death by his wife who was the other partner and as she was the remaining partner it fell to her to sell it. The estate had no say in any of it and eventually she paid out the 23k that she said was the estates share

rose28454

https://forums.moneysavingexpert.com/discussion/comment/81947913#Comment_81947913

https://forums.moneysavingexpert.com/discussion/comment/81947425#Comment_81947425

It was personal tax and for the years just before his death and since. A lot of it seems to be penalties and interest

Keep_pedalling

https://forums.moneysavingexpert.com/discussion/comment/81947913#Comment_81947913

What happened to the £23k paid to the estate?

poseidon1

The detailed thread below 2024 seems to suggest the executor prematurely made distributions of estate asset as well as settlement of personal loans owed by the deceased after raising liquid cash, prior to ascertaining, agreeing and setting liabilities owed to HMRC -

https://forums.moneysavingexpert.com/discussion/6519812/daughter-left-50-of-property-what-is-inheritance-tax-liability

This is a dangerous thing to have done, since HMRC is always a priority creditor over and above most other creditors, and failing to ascertain HMRC liabilties and settling those prior to distributions and settlement of non priority debts could in a worse case sceanario leave the errant executor personally liable for the estate tax debt.

On the assumption the estate distribution accounts do indeed show this is what occurred, rather than pursue the estate, HMRC could simply choose to make a personal claim against the executor. See article below -

https://www.premiersolicitors.co.uk/blog/how-to-manage-estate-liabilities-safely-as-executor#:~:text=Incorrectly%20prioritising%20payments%20can%20result,Personal%20Liability%20as%20an%20Executor

Keep_pedalling

It seems the executors may now be personally responsible for this debt. Based on the numbers provided in the previous thread the estate was far from insolvent and it should have been paid before any distribution to the beneficiaries.