We understand and appreciate that clients who act as executors may wish to complete certain duties and they believe this will lead to time and cost savings. Unfortunately, this can be a misconception and can lead to delays in administering the deceased’s estate and can incur avoidable costs.
There are a number of issues that can arise when executors decide to undertake their duties without professional assistance and the most common are executors incorrectly completing the probate and inheritance tax forms. This can ultimately lead to costly penalties being imposed by HMRC.
Although there is a lot of guidance and information available from the government website and other sources, completing the relevant forms can be the most difficult part of the probate process.
In more complex estates where inheritance tax is payable, the forms can be complicated. It is important to ensure you have done your research and fully understand what is being asked of you. If at any point you do not feel confident in your ability to complete the application it is recommended you seek professional advice.
Another common mistake is that executors may not apply for all the tax exemptions that the estate is eligible for. Without prior knowledge of probate, it is easy to miss out on potential tax exemptions you may be entitled to. Correctly applying for exemptions can potentially save the estate thousands of pounds in inheritance tax.
It is very important to provide the correct probate valuations for the assets in the deceased’s estate and be able to justify how you came to those values and provide evidence, if requested by HMRC.
It is not uncommon for an executor to underestimate the complexity of completing the forms and time quickly runs out resulting in interest being incurred. The time limit (6 months from the end of the month when the death occurred) can also cause the executor to rush the application which can lead to them making mistakes on the forms which will need to be corrected or in serious cases receiving a penalty from HMRC.
When an estate is subject to inheritance tax it is recommended to seek the advice of a professional. A solicitor’s knowledge and experience could reduce the amount of inheritance tax paid by the estate by much more than their fees for completing the work.