In a case earlier this year, Harris v HMRC, a personal representative (‘PR’) of an estate dealt with an estate worth around £1m. There was inheritance tax of over £300,000 payable.
The personal representative handed to a third party (a relative and beneficiary of the deceased) a sum of money on the understanding that that third party would settle the inheritance tax (‘IHT’) liability of the estate (amongst other sums outstanding). That third party returned home overseas, did not pay the outstanding inheritance tax and the PR could not contact him.
HMRC of course issued a demand for the IHT outstanding and the PR appealed on the basis he did not have the money, having handed it to the third party. The tribunal judge stated it was no defence that the PR had transferred monies including outstanding IHT to a third party on the basis that that third party would settle the outstanding IHT due. The judge also commented it was no defence the PR was unaware of his obligations to pay IHT due and that the PR’s appeal had no reasonable prospects of success.
This case shows how incredibly important it can be to take legal advice from a trusted professional when dealing with the administration of an estate, to ensure the correct procedures are followed and to ensure that PRs are aware of their obligations. Failure to obtain legal advice can mean that a PR can be sued in their personal liability for monies outstanding from an estate – even if the PR had acted in good faith.
This case illustrates just one way in which things can go very wrong for a PR who does not take legal advice – there are of course many other ways as well and this is why legal advice should be obtained even if things look straightforward at the outset.
This article aims to supply general information but it is not intended to constitute advice. Every effort is made to ensure that the law referred to is correct at the date of publication and to avoid any statement which may mislead. However, no duty of care is assumed to any person and no liability is accepted for any omission or inaccuracy. Always seek specific advice.