Acting as an Executor – what you need to know

Acting as an Executor – what you need to know

 

Have you ever been asked by family or friends to be an Executor in their Will? This article gives a broad overview of the responsibilities of an Executor and the tasks that you will be faced with whilst administering an Estate.

Upon death, the Executors have the choice to accept the role or not. Circumstances could change and one of the named Executors may no longer feel able to act. If this is the case a ‘deed of renunciation’ would be required.

The Executors are required to apply for a ‘Grant of Probate’. Probate gives the Executors the legal right to administer the Estate. Various actions and forms will be required in order to obtain the ‘Grant of Probate’.

 

An Inheritance Tax (IHT) Return on behalf of the deceased is to be submitted to HM Revenue & Customs within twelve months of the end of the month of death. A slight quirk is that any IHT payable is due within six months of the end of the month of death.

The IHT Return is a snapshot of the deceased’s assets and liabilities at the date of death. Assets include property, bank balances, personal possessions, shares owned by the deceased and refunds due.

Liabilities of the deceased would include outstanding debts, mortgages, overdrawn bank balances and taxes.

If the deceased made a gift within the seven years prior to their death this is required to be detailed on the IHT Return. An Executor will be required to make “full disclosure” of all such lifetime gifts which can cause some difficulties in certain cases.

Each individual has a ‘nil rate band’ of £325,000. If their Estate is less than this, including gifts made in the prior seven years no IHT is payable. If their Estate is over £325,000 IHT is payable at 40%. There are reliefs and exemptions available which may reduce the tax due including the new residential nil rate band plus the transferable nil rate band.

Once the IHT Return has been submitted and the tax paid, the Executors can apply for the ‘Grant of Probate’ via the Probate Registrar. The fee for this is now £215.

Once Probate has been granted, the Executors have the legal right to access the deceased’s assets. At this stage, the Executors are required to settle outstanding debts of the Estate.

If the Executors sell certain assets in the Estate, any profit is subject to Capital Gains Tax. The value of an asset has a base cost of the value of the asset at the date of death. You may need professional advise to help determine this value.

The Executors are required to disclose the income and gains during the period of administration to HM Revenue & Customs. If the Estate is complex a Self Assessment Tax Return would be required.

The administration period of the Estate ends when all liabilities have been paid and all assets collected. Before all of the assets are distributed to the beneficiaries it is best practice for the Executors to try and identify any unknown beneficiaries or creditors and this is done by placing a notice in the ‘London Gazette’. If the Executors have not taken this step and an unknown beneficiary or creditor does make a claim against the Estate. The Executors will be personally liable.

Once the clearance time has ceased on the notice, the final distributions can be made to the beneficiaries. Accounts are recommended to give a full breakdown of the Estate.

Taking the responsibility of being an Executor can be daunting, but with professional guidance it often becomes easier than you feared.