I am frequently asked by Will clients what the advantages of appointing a professional executor are. Quite commonly, a couple want to appoint either the surviving spouse or their partner as an executor, to act jointly with someone else or for a third party to be appointed as a replacement executor.
It is perfectly understandable why a client would like to appoint their spouse, or partner, as one of the executors. On the face of it, the executor’s responsibilities appear fairly straight forward. They need to collate details of the deceased’s assets and liabilities, submit an inheritance tax return, obtain the grant to the deceased estate and then, having realised the assets, distribute the assets to the relevant beneficiaries. However, this may not be as simple as it sounds. For example, the person making the WIll (the testator), may have been married before, and in his or her Will put some assets in trust for children from their first marriage. Or there may be ongoing trusts which need to be dealt with once the estate administration has been completed. As you can see, it may not be as straight forward as you initially thought.
In practice, the executor’s responsibilities can be onerous. They need to not only collate details of the deceased assets and liabilities, but also discharge any inheritance tax, identify the relevant beneficiaries discharge any income tax liabilities before distributing the estate. This process can be undertaken much more quickly and efficiently when professional executors such as the testator’s solicitors are appointed.
If you decide to appoint Moon Beever solicitors as professional executors, then we can structure the executorship clause in such a way so that you appoint the partners for the time being at Moon Beever, rather than named individuals. This has the advantage of covering the situation where a named executor has already passed away. Another advantage of appointing Moon Beever as a professional executor is that because Moon Beever is not a beneficiary, we will be impartial and make any decisions objectively, rather than subjectively.
It is important to remember that professional executors can be personally liable for their actions in dealing with the administration of the deceased’s estate. The recent case of Harris v HMRC (2018) UKFTT 0204 is a salutary reminder of an executor’s personal liability.
This case saw Mr Harris, who was appointed as personal representative of Helena McDonald’s estate, by letters of administration, filed for an inheritance tax (IHT 400) return. The value of the deceased estate was approximately £1.1 million and the IHT payable was £341,278.
According to the brief judgement it appears that following the sale of the deceased’s house, Mr Harris gave the proceeds of sale to the deceased’s brother who was also a beneficiary of the estate, Whitfield Harewood, on the understanding that Mr Harewood would pay the estate’s bills and taxes. Mr Harewood subsequently returned to his home in Barbados and did not discharge the outstanding inheritance tax. Unfortunately, Mr Harris was subsequently unable to trace or contact him. Section 200 of the IHTA 1984 provides that, with limited exceptions, the deceased’s personal representatives are liable for all the IHT payable on the deceased estate. HMRC issued a demand for the outstanding inheritance tax. Mr Harris appealed on the basis that he did not have the money and HMRC applied for the appeal to be struck out on the basis that it had ‘’no reasonable prospects of success’’.
The tribunal Judge, Nicholas Aleksander said:
‘’It is no defence to any inheritance tax determination that Mr Harris may have transferred the assets of the estate to a beneficiary on the basis that the beneficiary would be responsible for payments of the inheritance tax due. Nor is it a defence that Mr Harris was ignorant of his obligations, as personal representative, to pay the inheritance tax owing. Inevitably it follows (and I find) that Mr Harris’ appeal has no reasonable prospects of success’’.
This case illustrates the dangers faced by personal representatives of personal liability for their actions. In my experience, many personal representatives have little idea of the extent of personal liability they take on when acting as an executor or administrator of a deceased’s estate. Whilst it may make logical sense for a member of the testator’s family to be involved in the estate administration, there are clear advantages in also appointing a solicitor as a professional executor.
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