H&R Hughes Solicitors LLP

Putting Your Interests First

Heathfield: 01435 890 101

27a High Street, Heathfield, TN21 8JR

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Private Client News

January 2019

Beware the perils of DIY Estate Administration

“Executor left on the hook for £340,000 inheritance tax bill after beneficiary fails to pay”

This was the sobering headline in a very recent edition of the Telegraph which provides a particularly stark warning to individuals who agree to act as Executor/Administrator of a deceased’s estate.

The background is that Mrs Helena McDonald died intestate (i.e. without making a Will) leaving an estate of almost £1.2 million. Under the intestacy rules, Mrs McDonald’s brother, Mr Whitfield Harewood was the sole beneficiary of her estate.

Mr Harewood did not apply to be Administrator and instead, Mr Glynne Harris applied for a Grant of Letters of Administration and was appointed Administrator of the estate. ‘Administrator’ is the person appointed to deal with the estate when there is no valid Will. The role of Administrator carries the exact same responsibilities and duties as that of Executor.

In April 2013 Mr Harris filed an inheritance tax return and an initial payment of tax was made. As the estate contained land, it was possible for the remaining inheritance tax owed to HMRC to be paid in instalments whilst Mr Harris continued the process of gathering in the assets of the estate.

Mr Harris later released a substantial amount (possibly all) of the estate’s funds directly to Mr Harewood on the understanding that Mr Harewood would pay the remaining tax due. Unfortunately for Mr Harris, Mr Harewood promptly disappeared back to Barbados without paying! Mr Harris was then unable to contact Mr Harewood.

After opening an enquiry into the account, HMRC determined in October 2015 that the inheritance tax payable was £341,278. Mr Harris did not challenge the amount of tax owed but at appeal, argued that he should not be held liable because he had transferred the estate assets to the beneficiary strictly on the understanding that the beneficiary would pay!

The Tribunal Judge ruled in HMRC’s favour leaving Mr Harris personally liable for the outstanding tax.

The Law

S200 Inheritance Tax Act 1984 is clear as to who bears the burden of inheritance tax. It is the Executors/Administrators of the deceased (in this case, Mr Harris as Administrator) who have the obligation to pay any inheritance tax arising on death.

The Judge said it was no defence that Mr Harris had transferred the estate assets on the basis that Mr Harewood would be responsible for payment of the tax. It was also no defence that Mr Harris may have been ignorant of his obligations as administrator to pay the inheritance tax owing.

This particularly extreme case is a sharp reminder that acting as an Executor/Administrator carries very significant responsibility. It may feel like something of a privilege to be asked to be a friend or relative’s executor but people should understand exactly what is involved and what they are agreeing to.

The responsibilities of the Personal Representative

Acting as an Executor/Administrator is not an easy ride. It can be a long-term commitment requiring meticulous record keeping. Duties may include.

  • Arranging the funeral;
  • Taking an inventory of the deceased’s assets and liabilities;
  • Corresponding with financial institutions;
  • Completing inheritance tax returns and paying inheritance tax (if applicable);
  • Completing income and capital gains tax returns;
  • Paying all debts and charges of the estate;
  • Searching for missing assets;
  • Securing and insuring vacant property;
  • Preparing estate accounts; and
  • Distributing the residue of the estate to the beneficiaries.

Executors/Administrators are particularly exposed to the risk of mistake and potential litigation if any of the following apply;

  • The deceased dies without a Will;
  • The deceased made a “home-made” Will.
  • The estate is large and inheritance tax is due;
  • The estate includes a business or agricultural property;
  • There are disappointed beneficiaries/relatives;
  • Beneficiaries cannot be traced;

In such cases it is particularly important to take specialist advice from a solicitor who can assist in these areas.

The importance of making a Will

Statistics indicate that two thirds of adults in the UK do not have Wills in place. The estates of those that die without a Will are subject to the intestacy rules which have remained largely unchanged since 1925. Intestate estates are invariably more difficult (and expensive) to administer with greater risk attached to the Administrators.

A great deal of difficulty for loved ones can be avoided by putting a Will in place setting out details such as your chosen Executors, funeral preferences. guardianship for any children and indicating your chosen beneficiaries. Making a Will also provides an opportunity for inheritance tax planning.

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Practice News

December 2018 - future head office

We are delighted to announce that we have bought the former Natwest Bank building in Heathfield as our future head office.This purchase will enable us to provide much needed space for our growing number of lawyers , and more ( and more suitable ) rooms within which to meet clients, along with space for training.

Senior partner Hilary Hughes comments : “I am really excited about what this building will provide us with once refurbished .It will give the right environment for our lawyers staff to work more efficiently in suitable premises, and within which to meet with clients.This is a major investment for the firm and demonstrates our continuing commitment to our many valued clients and our first rate lawyers and staff-as well as the town of Heathfield as a whole”

May 2018 - New partner

The partners are very pleased to announce that Dee Benians, who has been with the firm for over 2 years, has joined the partnership.

Hilary Hughes comments: "Dee has gone from strength to strength and her pro active approach has been welcomed by everyone in the firm and clients alike.We are excited by the expertise she has already brought to the firm and by what the future holds for the firm as a whole as we continue to build on our solid foundations"

She has the traditional values that we share of putting her clients’ interests first.

August 2017 - New private client solicitor

We are delighted to announce the arrival of Ruth Weaver, a private client solicitor, with over 25 years experience is soon to join the firm from a Kent practice.

Ruth has wide experience in dealing with all aspects of private client legal work and particularly complex probates, powers of attorney and the legal aspects of care for the elderly.

She has the traditional values that we share of putting her clients’ interests first.

August 2017 - New Lawyer for our busy Residential Property Team

We are delighted to announce that David Millward will be joining the firm on 2 October. For several years David has been with a South Coast practice specialising in leasehold and freehold residential properties. David brings years of experience looking after people buying and selling their own homes and those looking to invest in flats and houses

Archive

May 2017 - Stamp Duty Land Tax

The effect of Government changes last year to Stamp Duty Land Tax and particularly to the tax applicable to residential properties continues to cause difficulties both for people looking to move home and for those looking to buy houses for purposes of redevelopment.

A much higher amount of Stamp Duty Land Tax is usually payable on the house or flat you buy if at such point you own any other residential property.

What is not so well known is that the higher rate also applies if you already own any interest in any other property anywhere in the world. So buyers with a holiday cottage or flat eg in France or Spain or further afield (-or even just a share in a holiday home) are caught – as, in most cases, are those with any residential investment property or even a small share in a residential investment property anywhere in the world.

Relief is available for people who buy and sell their own homes on the same day , and a reclaim of tax is possible if you sell one home within a fixed period of buying the other one.

For developers: buying a house to knock down and redevelop also automatically triggers the higher rate of Stamp Duty Land Tax.

Difficulties arise in assessing the correct Stamp Duty Land Tax where the property in question is “mixed use” (perhaps comprising a farmhouse, with a range of small business units and farmland).

Stamp Duty Land Tax is a “self-assessment” tax so it is up to the taxpayer to “get it right” or potentially face heavy fines and penalties from HMRC later.

May 2017 - Community Infrastructure Levy comes in in Wealden

Community Infrastructure Levy has now been adopted (with effect from April 2016) by Wealden District Council.

It is a tax, by any other name, calculated on a “square foot basis” for most types of new build development.

On a typical new family home the person who implements the planning permission in question is likely to face a Community Infrastructure Levy bill from Wealden District Council of £20,000 or more (dependent on size, location and some other factors).

There are very few exceptions.

May 2017 - Development in Wealden District Council – the impact of Ashdown Forest

Development in the Wealden area continues to be hampered by European legislation designed to protect areas such as Ashdown Forest.

High levels of nitrogen oxide have been demonstrated to cause major harm to the flora and fauna of the Forest and its long term well being.

As a result the Council have imposed wide ranging restraints on the potential for development in areas including Crowborough, Jarvis Brook, Uckfield and much of the northern part of the district.

Policies designed to ensure that traffic movements across the Ashdown Forest are limited is driving the areas within Wealden District where development is more likely to be permitted to the south and in particular to the areas around Hailsham and Polegate.

April 2017 - Probate Fees put on hold

As a result of a sustained challenge the Justice Secretary, Lynn Truss, has had her proposals to raise probate fees by 1000% put on hold or withdrawn. Seen by many as a callous attempt to further “tax the dead” it was clear that the revised probate fees bore no relationship to the costs being incurred by the Probate Registry in administering what in many cases was seen to be simple paperwork.

The legal profession have welcomed this “about turn” by the Government.

December 2016 - Baby in Waiting

Leanna Byrne is on maternity leave from Christmas 2016 and we extend every good wish to her on the birth of her baby, and look forward to seeing her back again!

During her absence Clare Lane is assisted by locum, Sarah Brain, and by legal support assistants Kellie Sallows and Clara Boyland.

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