Following the loss of a friend or relative, you find that you have been appointed as the executor of their Will. What do you do next?
The most sensible thing to do is to pay a visit to a solicitor for some advice as to how best to proceed. Others may have told you to try and deal with the estate yourself - but caution should prevail. Did you know, for example, that as an executor you can become personally liable to either the beneficiaries or to third parties if you do something wrong - even though you may not be aware that you have made a mistake?
Peoples' financial affairs are ever more complicated these days - and H M Revenue and Customs are increasingly aggressive. The Probate Registry will not give you anything other than basic advice. We often find ourselves advising executors who have tried to deal with the administration of an estate themselves and have run into problems. There are a variety of potential pitfalls, but some of the most common are set out below.
Interpreting the Will incorrectly
Over the years, there have been many cases where disputes have arisen as to how
the wording within a Will should be interpreted. Home made Wills and other
Wills not prepared by professionals can be badly drafted; professionally
drafted Wills can contain trusts or other complex provisions, especially in the
case of second marriages where both parties have children from previous
relationships. These clauses make perfect sense to solicitors - but as a layman
you may find that you struggle to understand them. There is a famous legal case
where the person who died left a Will leaving what he owned "All for
Mother." A dispute arose and it was established that it was his intention
to leave everything to his wife - whom he always referred to as mother! Things
are often not as they seem and it can be quite easy for someone not familiar
with the terminology to make a mistake in interpreting what is intended.
Failing to claim tax reliefs/exemptions
Tax is complex and inheritance tax in particular is a very specialist area.
There are a wide variety of reliefs and exemptions available - agricultural and
business property relief, normal expenditure out of income, and charity
exemption to name just a few - plus changes in the law in 2007 mean that it is
now possible in certain circumstances to carry forward an unused nil rate band.
If you sell certain types of asset within certain times at less than they were
valued at the date of death, it can be possible to claim back tax. HMRC will
not tell you if you fail to claim what you are entitled to - but a well
informed beneficiary will, and may decide to sue you if you've not done the job
properly.
Failing to fully declare the assets
Even with a small estate, you may find yourself having to deal with complicated
investments, such as discounted gift trusts, or land which the deceased was
considering obtaining planning permission for. It is your job as the executor
to ensure that you identify all the assets the deceased owned and declare them
properly. HMRC can and do apply severe penalties where assets are either not
declared or are not fully declared - even if the omission arose as a result of
a genuine mistake, giving rise to many months of stress in addition to the
potential financial implications.
Problems with liabilities
Sadly, it is not uncommon for people to leave debts - and you may find it hard
to identify all these. Solicitors routinely take steps when dealing with the
administration of estates to ensure that there is no risk of their executor
clients becoming personally liable for any debts they were not aware of. It can
be so easy to run into problems - for example, an executor recently distributed
an estate which included the proceeds of an insurance claim paid out several
years before to the deceased. The insurance was later declared to be invalid -
and the executor found himself having to pay back the claim value, as the
beneficiaries had spent the money paid to them. With professional advice, this
situation could easily have been avoided.
Dealing with the administration of an estate can be complex. Even if the estate is straightforward, it requires a good understanding of the procedure involved and the steps which can be taken to avoid incurring personal liability. A Solicitor like Bonallack and Bishop will be able to tell you how best to go about the job. Be aware that without the correct advice, you could find out years later that there is a problem and you may have to meet the cost of this out of your own pocket. Far better to take specialist advice at the time - the cost of getting a solicitor to deal with the administration for you is paid from the money in the estate, not by you personally, and will bring you the security and peace of mind that comes from knowing that you will not unwittingly put yourself in a position of incurring personal financial risk.
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