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Common problems when acting as an executor of a Will
Acting as an executor of a Will is a significant responsibility. Even simple estates can quickly become complex and challenging.
There are many reasons why an estate may be or could become difficult to deal with, but here is a snapshot of some of the potential complications and issues we see often.
Type of assets in the estate
Multiple properties or commercial properties: Properties must be accurately valued and correctly reported for inheritance tax.
Investments: there are a wide range of investments that the deceased may hold and different ways to value these investments. Some investments may be held in trust and some may qualify for Business Property Relief. It is therefore important that investments are declared correctly to HMRC and the correct allowances and exemptions applied.
Business Interests: shares in private companies or partnerships can be complex to value and the correct inheritance tax allowances applied.
Agricultural property or Woodland: the deceased may own agricultural property or woodland which will need to be correctly valued and assessed to see whether Agricultural Property Relief and/or Business Property Relief can be claimed.
Personal Property: Art, collectables, jewellery, vehicles, and other valuable items can all make an estate more difficult to deal with.
Inheritance tax
Lifetime gifts: there are complex rules regarding lifetime giving and various exemptions which may or may not apply. It is important that all gifts are correctly declared and the correct exemptions applied.
Transferable allowances: it may be possible to claim transferable allowances (Transferable Nil Rate Band or Transferable Residence Nil Rate Band) from the deceased’s spouse’s estate, but this depends upon the circumstances of both estates.
Residence Nil Rate Band: if the deceased owned (or previously owned) a property their estate may be eligible to claim this allowance but the rules are complex.
Trusts: if the deceased set up any trusts or was the beneficiary of a trust this may affect their inheritance tax position.
Exemptions: various exemptions might apply to the estate such as spouse exemption, charity exemption, Agricultural Property Relief and Business Property Relief. The rules surrounding these exemptions are complex and you must ensure that any available exemptions are claimed correctly.
Maximising available reliefs: in some cases where an estate does not qualify for certain reliefs or exemptions, it may be possible to vary the terms of the will using a deed of variation to increase the available allowances and reduce the amount of tax payable.
Income tax and capital gains tax
As an executor you have a duty to report and pay any Income Tax or Capital Gains Tax owed by the deceased or their estate. This may involve the completion of tax returns.
You will also have to provide all beneficiaries with details of the income they have received from the estate.
Distribution of Assets
Beneficiaries: You may need to identify or locate missing beneficiaries.
Distributions: If beneficiaries have died or the will is unclear, distribution can become difficult. Intestacy (when there is no will) adds further complications.
Complex family dynamics: Disputes or strained relationships can complicate even straightforward estates.
Charitable gifts: When gifts to a charity are left in a will then dealing with the charity directly often involves unique correspondence and compliance with their requirements.
Acting as an executor of a will can be daunting. To ensure that you are meeting your duties and to protect yourself from liability you should always consider seeking professional help. Such assistance can highlight potential problems and may even help save time, costs or tax in the long run. At Stone King we are no strangers to complex Wills and estates, and we have a team of experts who are here to help and guide you through what can be a difficult and stressful time. Please get in contact with one of our team today to find out how we can help.