Once the inheritance tax account has been delivered and the Grant of Probate or Letters of Administration has been issued the executor or administrator (“the Personal Representative”) can then start to gather in the assets of the estate.
Generally speaking this is likely to include the following where appropriate:
- Selling any house or land owned by the deceased;
- Selling any shares or other similar investments;
- Claiming any life policy proceeds on behalf of the estate;
- Closing bank or building society accounts; and/or
- When adequate funds are in hand paying discharging the liabilities of the estate.
Personal Representatives will need to open a special account with a bank unless they have solicitors acting for them, in which case the solicitor may be able to hold funds on behalf of the estate.
It is during this stage that Personal Representatives need to mindful about capital gains tax (“CGT”). If certain assets have increased in value since the deceased died there may be a CGT liability.
Provided that there are adequate funds to discharge the liabilities and expenses of the estate the executors or administrators need to discuss with beneficiaries whether they wish to take assets in specie (i.e. as they are) rather than receiving cash from the estate. For example, a beneficiary may wish to retain a property or shares as part of their entitlement rather than asking the Personal Representative to sell the assets and give them the proceeds from the sale. The transfer of assets from personal representatives to beneficiaries in specie (called an appropriation or assent) can be a useful tool for mitigating any CGT if done properly. This is technically part of the distribution of the estate which will be the subject of a blog tomorrow.
Also during this stage Personal Representatives may wish to advertise for creditors of the estate to come forward under the Trustee Act 1925. These notices offer protection to Personal Representatives who (a) have made full enquiries to see what liabilities the deceased had (b) have paid the liabilities that they had notice of and (c) have distributed the estate to the beneficiaries before a liability they are unaware of comes to their attention. Such notices do not invalidate the liability but it does mean that the beneficiaries can be pursued for payment by the creditor rather than the Personal Representative personally.
Personal Representatives also need to be mindful of their obligations to report changes to HMRC in relation to inheritance tax (“IHT”). A good example would be if the Personal Representative becomes aware of other assets that they were not aware of. Further. The Personal Representative needs to be aware of matters like loss on sale relief which can allow certain assets sold at a loss within specific timescales to be reported to HMRC and for a refund of IHT to follow.