The responsibilities of Personal Representatives in the administration of an estate are a burden easily taken for granted, simply conferred by a will and happily taken on by a well-intentioned friend or family member of the deceased. In rare cases, however, the obligation can have dire consequences. A recent case involving Inheritance Tax liability (Harris v HMRC (2018) has illustrated the pitfalls of acting as a personal representative for an estate. In Harris the personal representative of an estate transferred a substantial sum of money from the estate to a beneficiary on the basis that the beneficiary would pay the Inheritance Tax burden on that sum.
The beneficiary then left the country for Barbados without paying any of the tax due. The Courts have found that the personal representative is responsible for paying the tax despite not receiving any of the estate himself.
This is a good example of the dangers of taking on a legal obligation and should serve as a cautionary tale, however rare a result of this scale may be. It is far more common for a personal representative to be held responsible for minor infractions as a result of careless filings, such as in Usher & Anor v HMRC (2016). In this case two unrepresented executors incurred a £5,000 fine from the HMRC by mistakenly failing to disclose income on an estate. Despite having no malicious intention, the two representatives were held liable for both the fine and the tax on the undeclared income.
Both of these cases, among many others, show that the obligations that come with administering an estate are not to be taken lightly. In any case, however minor, proper legal advice and representation should be procured to ensure that the process can move forward with minimal risk and provide peace of mind that you will not find yourself liable for costs that you did not anticipate. Probate professionals have the benefit of indemnity insurance, and a wealth of knowledge to avoid getting into situations such as the ones above, and this provides a level of protection that could prove invaluable at a very important time.
For queries or information on how we can assist you with your duties as a personal representative, please contact Jag Shah of our private client team.