It has often been said that dealing with the administration of the estate of someone who has passed away is fairly straightforward. Indeed, it is surprising how many executors feel that they can administer the estate of a loved one themselves. *Recent surveys indicate that 42% of the public would deal with some element of an estate administration themselves with 12% saying they would deal with all the legal issues themselves.
Unfortunately, ‘lay executors’ are unaware of the potential pitfalls during the administration of an estate or of their own potential personal liabilities if they do not receive legal advice.
This has recently been highlighted in the case of Harris v HMRC  UKFTT 204.
The brief facts of this case are as follows:
- Mr Harris was appointed as the personal representative of the estate of the late Helena McDonald
- He dealt with the estate himself and filed the inheritance tax (IHT) return in June 2013 and in October 2015, HMRC determined that the estate owed £341,278.76 in IHT
- Mr Harris applied for statutory review of the determination by HMRC
- The determination of IHT was upheld and Mr Harris appealed on the grounds that that there was not sufficient funds to pay the IHT
- Unfortunately for Mr Harris, he had released the vast majority (if not all) of the estate’s funds to the deceased’s brother who was the sole beneficiary of the estate on the understanding that this brother would pay the estate’s bills and taxes
- The brother travelled to Barbados and had not returned and Mr Harris was unable to contact him
The tribunal held that under section 200 of the Inheritance Tax Act 1984, Mr Harris as the personal representative was personally liable for the IHT due.
It was also held that ignorance of the obligations attributed to a personal representative was not a suitable defence. Furthermore, he could not rely on the fact that he had transferred assets to a beneficiary on the assurance that the beneficiary would pay the tax.
Whilst one may have some sympathy for Mr Harris as he relied on the assurance of the brother, this case highlights a worrying issue for personal representatives who do not know the law in respect of estate administration.
Personal representatives may also find themselves personally liable for a variety of issue including penalties and if they have not taken professional advice from a solicitor they will have no defence.
If a personal representative obtains legal advice from a solicitor and as a result of the advice a problem ensues he/she will have recourse against the professional and will not be personally liable.
It is essential that legal advice is obtained by personal representatives during the administration of the estate. If professional advice is obtained, the estate will proceed quicker and more efficiently than if the personal representative tried to administer it themselves.
Unfortunately, some personal representatives attempt to administer an estate themselves to save the estate money in solicitors fees but they are unaware of the personal liability they are exposing themselves too. Consulting a legal expert will help in such circumstances ensuring the administration of an estate is dealt with correctly.
* You Gov Legal Services 2017