Further problems with executor of will

[ItIsOnlyMe]

I asked a question a while back about lack of trust in the executor of a will and I am afraid that my worst thoughts about him are coming true.
I suspect he is trying to defer his own tax liability by passing it on to other relatives.

Here is what is happening; over the last few years of her life the deceased grandmother gave gifts of a few thousand pounds to her grandchildren.and her son. Having died within 7 years of these gifts they are being taken as part of her estate for inheritance tax calculation. So far, so good....But.

The executor is saying that the grandchildren as the recipient of the gift will have to pay the tax, surely it is the estate that is liable for the tax and not the recipient of the gift. I am sure the will stated that he received "the balance of her estate after expenses, debts, taxes"

Also on the four days following the death he withdraw �250 per day from the deceased' bank account to cover "expenses", he already had her cash card to do her shopping e.t.c, as she had died did his authority to withdraw her money die with her? Or is he allowed to withdraw cash to cover expenses? Will he have to account for these expenses to probate?


Here is the address of the old question for those interested.

http://www.theanswerbank.co.uk/Law/Question530 203.html

[Buenchico]

The executor seems to be doing at least some things by the book. Here are are couple of relevant quotes from the HMRC website:

Quote 1:
"If there is any IHT to pay, the tax must be paid before the Probate Registry will issue a grant"

Source:
http://www.hmrc.gov.uk/cto/iht.htm

Quote 2:
"The tax is payable by the person who received the gift"

Source:
http://www.hmrc.gov.uk/cto/customerguide/page6 .htm

The original authority to withdraw cash using the cash card probably ended upon the grandmother's death but a new authority was effectively created by the will which named the holder of the card as executor. (He might have broken the bank's rules by withdrawing the money without the relevant paperwork but, as long as he accounts for the money in his statement presented to the probate office, it's unlikely that his actions would be regarded as unlawful).

I contributed to the response to your original question, and I understand your concerns about the probity of the executor, but I can find nothing particularly unusual or alarming in the conduct that you've described in this post.

Chris

[dzug]

The estate is liable for the tax unless it doesn't have the money to pay for it - which is unlikely.

Whether he had authority to withdraw that money is doubtful. I'd say pretty certainly not. However having got it, it's the same as if he found that money in the house - he has to account for it in the estate but can use it in the interim to pay expenses

[ItIsOnlyMe]

Thanks to you both for your replies, though there seems to be a disagreement about who pays the tax.

Looking at the links you have posted Chris I think you have lifted quote 2 from the wrong example on the HMRC site.

As the total value of gifts given (about �30-40k) away is below the IHT threshold I think this example is the valid one :

"In May 1997 Richard, a widower, made a cash gift of �153,000 to his son. The chargeable value of the gift was �150,000, after deducting the �3,000 annual exemption. In June 2002, when the taxable threshold is �250,000, Richard died leaving an estate worth �500,000. As less than seven years has passed since Richard made the gift, the chargeable value of the gift is added to Richard's estate.

The inheritance tax payable on �400,000 at 40% is �160,000. The tax is payable by Richard's legal personal representatives, normally out of estate funds.

No tax is payable on the gift itself, because it does not exceed the taxable threshold. However, the existence of the gift means that consequently more of the estate at death is taxed at the 40% rate because the gift uses up some of the available threshold that is tax free.
"

This example states that "The tax is payable by Richard's legal personal representatives, normally out of estate funds."

and also

"No tax is payable on the gift itself, because it does not exceed the taxable threshold."

Am i thinking on the right lines?

I think this is all happening because it transpires that the executor was given at least �30k of the �40k given away and is now liable for �12k IHT on prior gifts, he looks to be trying to get others to pay up and I am keen not to let him get away with it !

[ItIsOnlyMe]

ps.....he is liable for the extra IHT because he is also the main beneficiary of the estate.

Do you guys have any advice on the "balance of the estate after expenses, debts and taxes" part of the will.

Does this stop him from dividing up his tax liability.

[themas]

I agree with Dzug. I don't think you should be looking at it as "his" IHT liability. It is the liability of the estate. All of the IHT should come out of the estate assets if there are sufficient of them, & the beneficiaries share whatever is left over in accordance with the terms of the will. If there are not sufficient assets in the estate to pay the IHT then the recipients of the gifts become liable to pay the balance. So far as I am aware their liability is in proportion to the amount of the gift (so, for example, if A received a gift of �5K and B a gift of �50K, A would pay one tenth as much of the IHT as B).

[ItIsOnlyMe]

Thanks Themas,

I am thinking of it as "his IHT" because the will states that each grandaughter receives x amount of money each great grandchild gets x and the remainder of the estate after tax/funeral costs etc goes to him.

So if the estate is �350k - �70k named gifts=�280k.

He gets the balance of the �280k after �20k IHT and �5k funeral expenses=�255k. But in any event the named gifts are set in stone and there is no IHT to pay on the previous gifts, only the value of the gift will be included in the value of the estate to work out the estates liability which there will be more than sufficient funds to cover.