Executors’ Duties

The executors of a deceased’s estate have the following duties (and this list is not exhaustive):-

  • Arrange the funeral
  • obtain details of all assets and debts
  • pay any inheritance tax (IHT) due
  • obtain a grant of probate (a document which allows the executors to deal with the assets of the deceased)
  • gather in all of the assets
  • pay the deceased’s debts
  • distribute the deceased’s estate in accordance with their Will

Payment of Inheritance Tax

The duty to pay any IHT (and other taxes) due may seem a straightforward one, but it is, in fact, a complicated process of valuing the assets of the estate, determining which (if any) exemptions apply, filling in a return (including potentially multiple supplementary forms), assessing what tax (if any) is due and then paying that tax.

An error made in this process could potentially result in the executors being personally liable to HMRC for a penalty imposed, which as you will see below could be as much as 100% of the tax due. This cannot be reclaimed from the estate. It is therefore essential that executors submit an accurate IHT return and pay the correct amount.

Valuation of Assets

The basis for the valuation of the deceased’s assets for IHT purposes is the ‘open market value’, which means the price the asset might reasonably be expected to make if sold on the open market at the time of their death.

Some of these valuations will be obvious, such as bank accounts, shares, etc. Others will require formal valuations. With regard to land, it is recommended that executors obtain at least two estate agents’ valuations. If the land (or the property on it) is unusual in some way or the land itself has the potential for development it will be advisable to obtain a surveyor’s report.

Whatever method is used to value the land, it is important that the executors are able to justify the value submitted as HMRC can raise a penalty where it considers the executors have negligently supplied a valuation.

Penalties for failure to pay IHT

HMRC penalties will generally fall under three headings:-

  • failure to deliver an account
  • inaccuracies in returns delivered
  • late payment of IHT due

Inaccuracies in Returns

Penalties apply to errors in an IHT return (including supporting documentation), whether the errors are