Since we started to deal with probate cases we have come into contact with many executors. Usually they are close relatives or friends who the deceased trusted enough to look after their estate on death.
We do wonder sometimes if those appointed as executors actually know what they’re signing up for. So we thought it might be useful to summarise an executor’s duties. This should help those who are currently writing their wills and those who are asked to take on the role.
What does an executor have to do?
An executor is anyone named in a Will to carry out the duty of administering the estate of the deceased. As part of these duties they will need to:
- Locate assets and liabilities
- Submit details of the estate to HMRC
- Pay any tax due
- Obtain the grant of probate
- Distribute 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. However it could last several years if the estate is more complex.
Anyone aged 18 or over with mental capacity can be an executor. People named as executor can also benefit under the will. It is usual for testators to name their spouse, children or other family members as executors. Alternatively 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:
- Instruct a probate professional to deal with the administration for you. However you will still need to approve and sign all the documents.
- ‘Reserve powers’. That means you step back from playing an active role in the administration in favour of the remaining executors. You can still be reappointed in the future if required.
- ‘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 if you have already carried out any work on the estate. That is legally known as intermeddling.
- 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 receive payments for being an executor?
Unfortunately not. Lay executors cannot receive fees for their time. They can accept reimbursements for reasonable costs incurred. An example would be mileage for visiting a probate property or the costs of obtaining the death certificates. Professional executors can charge for their time, and there is usually 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.
It is a formal document. It confirms the executors’ authority to collect in all the assets, pay outstanding liabilities and tax due, and 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 information relating to the assets and liabilities of the deceased. That includes any gifts made in the previous seven years. You may also need to complete a tax return from 6 April last until the date of death. That would only be necessary if the deceased had income or chargeable gains that warranted a tax return.
The next step is to complete the appropriate inheritance tax (IHT) forms. Which ones you use will depend on the size and makeup of the estate assets. You will also need to complete the probate form PA1 or online submission 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 pay HMRC out of estate funds. The due date for IHT is the end of the sixth month after the month of death. Any part of the tax that relates to land and buildings may be paid in 10 annual instalments. If you do not pay the tax on time interest will accrue until it is paid.
What about after the grant is issued?
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 increase in value between the dates of death and disposal there may be some capital gains tax (CGT) payable. You should consider ways to mitigate CGT such as appropriating assets to beneficiaries.
Should 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 tax.
What is an executor liable for?
Firstly 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. You can however make interim payments if funds allow. Beware though, you could 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 any beneficiaries who are out of pocket.
If you opt to pay IHT by instalments we recommend you retain the full amount due before passing assets to the residuary beneficiaries. In a recent case ‘Harris v HMRC’ the executor, Mr Harris, was liable for £340,000 of IHT. He 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.
Equally there are steps you can take to protect yourself as an executor.
You have the option to use a statutory notice. You should place this in a local paper for every area in which the deceased owned a property and in the London Gazette. It will inform any unknown creditors of the death. That protects the executors from unknown creditors and beneficiaries. You should not distribute the estate until two months has elapsed since you placed the advert.
If you do not place a notice you may have some personal liability for an unidentified debt. That would be where a creditor comes forward after the estate has been distributed. The notice will not, however, prevent an unknown creditor from pursuing the residuary beneficiaries.
You can also seek expert professional advice 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.