Payment of IHT - did you know?

mountainofdebt

A friend of mine is dealing with an estate under which IHT is payable.

Although he was initially told that he couldn't use the cash in the deceased's bank account to pay IHT and was in the process of arranging a loan to pay it, he has later found out that it is indeed possible to do this (thanks to a very nice lady at the probate office).

Murdina

I think it depends whether or not probate has been granted i.e. usually you cannot access the funds in the estate until probate is granted.

On an associated issue, if the deceased owes money under self-assessment from before their death, so long as you contact the collector or accounts office, they will not seek payment until 30 days after probate is granted and interest is only charged from then. I have known families quite unnecessarily meet liabilities from their own pocket because no one had made them aware of this.

CLAPTON

Murdina wrote: »

I think it depends whether or not probate has been granted i.e. usually you cannot access the funds in the estate until probate is granted.

On an associated issue, if the deceased owes money under self-assessment from before their death, so long as you contact the collector or accounts office, they will not seek payment until 30 days after probate is granted and interest is only charged from then. I have known families quite unnecessarily meet liabilities from their own pocket because no one had made them aware of this.

The point being made (correctly) is that most banks and building societies will in fact release funds to pay IHT BEFORE probate.

Some will transfer funds directly to the HMRC and others will send you a cheque although made out to the HMRC.

Murdina

Maybe in theory. My experience in dealing with deceased client's income tax affairs is that in practice it is virtually impossible to persuade banks - and indeed, if it were so easy, why would HMRC be so accommodating over income tax payments. I had one client where the solicitor fought the point tool and nail, to no avail.

CLAPTON

My direct and actual experience was dealing with IHT and not income tax.
The Nationwide, Britannia , Natwest and Halifax all agreed to release funds to pay IHT before probate.

mountainofdebt

Clapton

Actually the deceased had a bank account with Natwest and it seems that not all staff (surprisingly) are aware that this can be done.

My friend was also told that as soon as they received confirmation that the IHT the forms relating to the probate would be issued - all in all my friend is very pleased at the service and help he has been given by the probate service

Mikeyorks

In my (limited) experience, Probate has not been an issue. Most Banks should release funds to pay for urgent and immediate expenses from the deceased account ... on production of the appropriate invoice / statement. Includes funeral expenses / IHT / SA .... but not 'domestic' bills.

But in general local Bank staff do seem oblivious to such practicalities / sensitivities and are often not aware of the material on their own websites. Halifax, for example, have had to centralise the handling of deceased cases, because their local staff have created so many complaints.

Extract from their bereavement.pdf :-

If you need money urgently, you may be able to get a cheque drawn from most Halifax and Bank of Scotland banking and savings accounts held by the deceased. If the accounts are held with Halifax or Bank of Scotland and you require funds for funeral costs or other urgent expenses before legal documents are obtained, simply give us a letter saying you have applied or are going to apply for Grant of Representation/Confirmation and enclose the original invoices that require payment. Where we are able, we would make cheques payable to the funeral director or HM Revenue & Customs, HM Paymaster or the Scottish Court Service, as appropriate.

Murdina

Mikeyorks that's very interesting and certainly something I will pick up on in future. It can be very difficult and frustrating for families.