Close form

What is an executor?

23 June 2021
Jan Friend
Estate Planning / IHT, Probate

Since we started to deal with probate cases we have come into contact with many executors. Usually these are close relatives or friends of the deceased who were trusted enough to be appointed to deal with the estate on death.

We do wonder sometimes if those being appointed as executors actually know what they’re signing up for, so we thought it might be useful to summarise an executor’s duties – both for those who are currently writing their wills and for those who are asked to take on the role.

In simple terms an executor is someone named in a will to carry out the duty of administering the estate of the deceased. That includes:

  • Locating assets and liabilities
  • Submitting details of the estate to HMRC
  • Paying any tax due
  • Obtaining the grant of probate
  • Distributing the estate in accordance with the terms of the will

The appointment will usually take between six and 12 months for a straight forward case but could last several years if the estate is more complex.

Anyone aged 18 or over with mental capacity can be appointed as an executor and people named as executor can also benefit under the will. It is usual for people to name their spouse, children or other family members as executors, although they can appoint professional executors.

If I’m appointed as an executor do I have to act?

The simple answer is no. If you do not want to act as executor you have a few options:

  • You can instruct a probate professional to deal with the administration for you, although you will still need to approve and sign all the documents.
  • You can ‘reserve powers’. That means you step back from playing an active role in the administration in favour of the remaining executors, but you can still be reappointed in the future if required.
  • You can ‘renounce’ your powers as an executor. You will then be completely removed from the role and this cannot be reversed. You are not permitted to renounce however if you have already carried out any work on the estate (legally known as intermeddling).
  • You can appoint an attorney to obtain the grant on your behalf. This might be useful if only one executor is named in the Will.

Can I be paid for being an executor?

Unfortunately not, lay executors cannot be paid for their time although they are entitled to be reimbursed for reasonable costs incurred, such as mileage for visiting a probate property or the costs of obtaining the death certificates. Professional executors on the other hand can charge for their time, and there will usually be a clause in the will specifying this.

What is a grant?

The grant is usually required in order to liquidate or transfer the assets of the deceased to the beneficiaries. Depending on whether or not there is a will the grant may be a grant of probate or a grant of letters of administration.

The grant is a formal document confirming the executors’ authority to collect in all the assets, to pay outstanding liabilities and tax due, and to distribute the estate in accordance with the terms of the will or intestacy.

What responsibilities does an executor have?

Before the grant is issued you will need to collate all the information relating to the assets and liabilities of the deceased, including any gifts made in the previous seven years. You will also need to make sure a tax return is completed from 6 April last until the date of death, if the deceased has income or chargeable gains in that period that warrant a return being prepared.

The next step is to complete the appropriate inheritance tax (IHT) forms – which ones to use will depend on the size and makeup of the estate assets. At the same time, you will need to complete the probate form PA1 and sign a legal statement. There is guidance on applying for probate on the government’s website: https://www.gov.uk/applying-for-probate/apply-for-probate.

If the estate exceeds the available nil rate bands there will be IHT to pay. It is part of the duty of an executor to assess the amount of tax due and make the necessary payment to HMRC out of estate funds. The due date for IHT is the end of the sixth month after the month of death. However if any of the tax relates to land and buildings that part may be paid in 10 annual instalments. If the tax is not paid on time interest will accrue until it is paid.

Once the grant is issued you need to collect in all the assets, pay any outstanding liabilities and distribute the remaining assets and funds in accordance with the will. If any of the assets have increased in value between the date of death and date of disposal there may be some capital gains tax (CGT) payable. There are ways to mitigate any CGT due such as appropriation of assets to the beneficiaries, which you will need to take into account.

If any further assets or liabilities come to light after submitting the IHT forms you will need to complete and file a corrective account with HMRC and pay any additional IHT.

What is an executor liable for?

An executor is personally liable for any loss resulting from a breach of duty, even if the mistake was unintentional. The beneficiaries have a right to bring a claim against you to recover losses.

All liabilities must be met from the estate prior to distributing assets to the residuary beneficiaries, although you can make interim payments if funds allow. You can however be held liable for non-payment of debts if you distribute to beneficiaries and fail to satisfy all debts in full.

One of your duties as executor is to distribute the estate in accordance with the will. If you fail to interpret the will correctly and consequently distribute the assets incorrectly you will be liable to those who should have benefitted.

If you opt to pay IHT by instalments we recommend that you keep back the full amount due before passing assets to the residuary beneficiaries. In a recent case ‘Harris v HMRC’ the executor, Mr Harris, was liable to £340,000 of IHT even though he had transferred the remaining assets to the beneficiary on the understanding that the beneficiary would pay the outstanding tax. Unfortunately for the executor the beneficiary promptly sold up, moved to Barbados and could not be contacted!

Normally people who have received gifts within seven years of death are liable for any IHT payable on that gift. However if they fail to pay HMRC can come after the executors for any unpaid tax and interest. Although you have the right to claim the tax back from the recipient of the gift there is no guarantee that they will have the funds to reimburse you, so you may be permanently out of pocket.

This all sounds quite scary – should I refuse an appointment as executor?

It may depend on how complicated the estate is and how confident you are in dealing with legal documents and paperwork.

There are steps you can take to protect yourself as an executor.

You have the option to use a statutory notice which should be placed in a local paper for every area in which the deceased owned a property, as well as the London Gazette, to inform any unknown creditors of the death. That protects the executors from unknown creditors and beneficiaries, provided distribution is not made until the prescribed time has elapsed, usually about two months from the time the advert is placed.

If you do not place a notice and a creditor comes forward after the estate has been distributed, then you may have some personal liability for an unidentified debt. The notice will not, however, prevent an unknown creditor from pursuing the residuary beneficiaries.

You also have the option to seek professional advice from someone who specialises in the administration of estates to ensure that you carry out the process correctly.

The content in this blog is correct as at 23/06/2021. See terms and conditions.

Similar articles

girl on laptop with dog asleep
29 June 2021

Don’t miss out on tax relief for home working!

Given the recent advice from our prime minster about working from home where applicable, many employees will be wondering whether they can make a tax claim for working from home.

Confetti on floor
7 June 2021

What are the common traits of a successful business owner?

Having been in business myself now for almost 30 years I have seen the common traits of those business people who are successful and those who aren’t. It isn’t about having an extraordinary new idea which no one has thought about or tapping into new markets, although this is great if you can. It is more about doing the right things and doing them well.

Telsa Electric car in feild at sunset
4 June 2021

What is salary sacrifice and how can it save me tax?

Salary sacrifice schemes have been around for many years, but they should not be overlooked because when used as part of an overall remuneration package they can save significant amounts of tax and national insurance for employees and employers.

Our 3 step risk-free guarantee puts your mind at rest and keeps us on our toes!

FIND OUT MORE
Bryant House - Friend and Grant Chartered Acocuntants and Tax Advisors

Book Your Discovery Meeting

Are you hungry for success? If you run a small to medium size business and you want to grow your sales, increase profitability and pay less tax then you have come to the right place.