You may be wondering if an executor can withhold money from a beneficiary, especially if it’s taking a long time for the estate to be handled. This can be extremely frustrating; however, the process can be time-consuming as the executor must follow the probate process correctly.
Can an executor withhold money from a beneficiary?
In England and Wales, the normal process is that an estate will be ‘paid out’ to the executor and then the amount of the residuary estate is determined and distributed to the beneficiaries. Some considerations include:
- Debts or liabilities of the deceased needing to be paid off - If the deceased had debts when they died these will become a liability of the estate. As a result, the estate assets will need to be used to pay these off. Likewise, the estate assets will be used to pay any post-death liabilities that accrue such as income tax; estate administration costs, and funeral expenses.
- The beneficiary's money is held in a trust until they reach a certain age - Trusts are often created for children or vulnerable people and are typically used to safeguard money or property until they turn 18 or 21. The trustee of the will trust will be responsible for managing the trust until the beneficiary can access it.
- Inheritance tax needing to be paid on the estate - Inheritance tax doesn’t usually need paying if the estate is under the value of £325,000 and if you leave everything to your spouse, civil partner, a charity or a community amateur sports club. If inheritance needs paying over the nil rate band allowance, the standard rate is 40%.
- If a beneficiary cannot be found - If a beneficiary cannot be found, the executor can withhold their money or assets until they are found. The executor should try and trace the beneficiary using a tracing agent. If the beneficiary cannot be found, it is possible to pay the monies into Court. Another option to the executor is to pay the money into a separate bank account to ring-fence it. As a very last resort, the executor could redistribute the inheritance among all known beneficiaries providing they agree, in writing, to return part of the estate to the remaining beneficiary if they come forward – this is known as an indemnity.
- Delays in the probate process - Probate is a fairly lengthy process anyway, with it taking between 6 months and a year when the process is clean-cut. However, this can be even longer, especially as all debts should be paid off before inheritance can be distributed to the beneficiaries.
If you’re an executor of a will and aren’t sure whether you should be withholding money from a beneficiary, contact us today for further support or advice.
How long can an executor withhold money from a beneficiary?
While there isn’t a specific time frame for executors to have the ability to withhold money from a beneficiary, it isn’t unreasonable for them to take up to a year to deal with an estate, where it is straightforward.
What are the consequences of an executor withholding money from a beneficiary?
There are a number of consequences to executors withholding money from a beneficiary, such as:
- Financial consequences - If estate funds are mis-used, the Court will order that the executor pay the money back to the estate for it then then be distributed. If a beneficiary’s claim that a will ha been withheld is successful, there is a good chance of securing an order against the executor where they will need to pay then ben’s reasonable costs of the claim. This usually equates to roughly 60%.
- Legal disputes - If a beneficiary feels as though they have been unlawfully denied their inheritance, they may take legal action, which can lengthen the probate process even further.
- Broken relationships - If the executor and beneficiary are related, withholding money from the beneficiary could cause tension and frustration that can cause a breakdown in their relationship.
What to do if an executor is withholding money?
- While it’s completely up to the executor whether they keep you up to date with how they’re managing the estate, it is a matter of good practice and you can approach them to ask for any updates or explanations for the delay.
- If the executor cannot give a good reason for the delay you can request that they provide an ‘account’ of the estate that tells you the assets and liabilities as well as the net estate.
- If you still have received no update you can issue a claim to remove the executor and trustee from the will. You can also ask for an inventory and account of the estate at the same time, in the High Court. If appropriate, you can also ask the court to make an order against the executor/trustee if any misapplication of funds has taken place.
For further help and advice regarding what to do if an executor is withholding money from a beneficiary, get in touch with our Contentious Probate Solicitors today.
