Lucy Cortis, Solicitor in our Private Client team, discusses the pitfalls of Executors trying to administer an estate.

As most practitioners in the private client field are already aware, the practice by which applications for a Grant of Probate can now be made online has led to an increase in the number of executors wishing to complete the process without instructing a solicitor or other legal professional. Such executors, particularly if they are also one of the estate beneficiaries, often believe that by administering the estate themselves they will save on legal costs and thereby potentially increase their own share of the estate. However, what such clients are probably not aware of is that by executing such Wills themselves, without the assistance of any professional advice, they are often missing out on the variety of inheritance tax reliefs which may be available.

The extent of this issue can be graphically illustrated by the fact that HM Revenue & Customs (HMRC) are now receiving a record haul of inheritance tax. During the 2012-13 tax year HMRC collected £3.1 billion in inheritance tax however by the 2016-17 tax year, this figure had risen to £4.8 billion. A record high level was reached in February of this year at £5.3 billion. By comparison the level of reliefs claimed has fallen from 51% to 41% over the last 5 years. Based on current trends this figure is expected to continue to fall as more applications continue to be made without any legal assistance or advice.

Most executors are unaware that such reliefs need to be claimed and will not simply be applied by HMRC based on the figures they have provided. Also, recent changes in the inheritance tax law, particularly the implementation of the new residence nil rate band has substantially increased the complexity of this area.

Another relevant fact of which most executors are also probably unaware is that if the other beneficiaries of the estate find out that certain tax reliefs were available to the estate and, since the executor administered the estate themselves, were not claimed the executor themselves could be held liable.

Overall, to fully protect the executor and due to the potential added complexity associated with larger estates it would be advisable to instruct a solicitor to at least obtain the Grant of Probate and possibly to administer the whole estate on behalf of the executors. The associated legal costs are likely to be a lot less that the potential costs of been held liable by the beneficiaries and can, in any event be deducted from the estate.

For more information contact Lucy Cortis at lucycortis@eatonsmith.co.uk