It is very common for those making a will to ask a responsible relative or friend to act as the executor of their will when they die. More often than not, people accept the request without really knowing what is involved in administering an estate nor the duties and legal responsibilities (and liabilities) it entails. The size of the estate (i.e. the assets left by the deceased) is not necessarily an indicator of how complicated the administration is likely to be. Sometimes, an estate worth millions can be easier to deal with than one worth considerably less but, regardless of complexity, it is important that you administer the estate correctly to avoid any difficulties with beneficiaries or HMRC regarding tax owed.
As an executor, you are personally responsible and liable for the correct administration, reporting and distribution of the estate once you have begun to act. The following list details the tasks you will need to complete in order to fulfil your responsibilities:
- Register the death and arrange the funeral. This can be undertaken by family members but if there is no-one to make the arrangements it will fall to the executor.
- Secure the estate – ensure any property is secured and is insured, arranging insurance if not, and identifying and removing any valuables for safe keeping.
- Establish the assets and liabilities of the estate – identify assets and liabilities and arrange for them to be valued at the date of death, then obtain the best price for the assets when arranging to collect them into the estate.
- Report and pay any taxes due – submit the relevant HMRC forms to report values of the estate and claim any appropriate allowances or reliefs. Arrange payment of inheritance tax in accordance with HMRC timescales. Also consider and settle any income tax or capital gains tax due either on death or during the administration.
- Obtain the Grant of Probate – submit a probate application form to the Probate court with the original Will in order to confirm the executor’s authority and proof of title to the estate.
- Pay the liabilities- there is a strict order of payment of liabilities should there be insufficient assets to settle all debts, and liabilities should be paid before estate distributions are made.
- Administer the estate in accordance with the terms of the Will – the Executor should comply with the terms of the Will, acting in the best interests of the estate, identifying specific bequests and paying legacies.
- Treat beneficiaries fairly and equally – the executor should act impartially ensuring their personal interests do not conflict with their role as executor, and that they do not act to their own personal gain.
- Provide financial information to residuary beneficiaries – produce a set of estate accounts at the end of the administration and provide a copy to the residuary beneficiaries (the residuary beneficiaries are those receiving the ‘residue’ of the estate once all administration expenses, taxes owed and gifts are paid)..
Administering an estate is an onerous business due to the number of forms that have to be completed and the amount of cross-referencing that is required. The more complex the estate, the more onerous the administration, making it very easy for an executor, unfamiliar with the system, to overlook a potential relief, or reliefs, or worse, missing something that might be material as far as HMRC is concerned when assessing liability for IHT.
Although it is not a requirement to seek professional advice when administering an estate, it is worth considering to give you peace of mind that you have executed your responsibilities correctly.