When someone dies, they leave behind an ‘estate’. Their estate is formed from all their money, assets, property, possessions, debts, and liabilities. As you might imagine, bringing together and valuing all these different pieces can be a difficult and lengthy process. But it must be done, and the task is the responsibility of the deceased’s personal representatives.
There are two kinds of personal representative in estate administration.
- Executors (probably the most well-known of the two) – which are personal representatives who have been appointed under the deceased’s Will.
- Administrators – which are personal representatives who have undertaken to administer the estate where there was no valid Will or where no valid Executors were appointed in the Will.
Acting as someone’s personal representative is very much a position of trust. Estate administration is not easy. As a personal representative, you will also be personally liable for making sure the estate is administered correctly (more on this later). But does this mean you need to engage the services of a solicitor?
Do I need to use a solicitor?
Strictly speaking: no. It is up to you whether you engage a solicitor to help you with your duties or not. However, there are many good reasons why solicitors offer estate administration services and we will explore some of these below.
The dangers of administering an estate without support
Perhaps the main argument, in favour of obtaining legal support, relates to what might happen should things go wrong. The recent case of Harris v HMRC  UKFTT 204 (TC) shows what kind of drastic consequences can arise.
The case concerned inheritance tax, which was payable on the estate of Helena McDonald. From the facts of the case, it appears Ms McDonald left no Will, and so her personal representative, Glyne Harris, was appointed to be the administrator of her estate by letters of administration.
Ms McDonald’s estate was valued at just under £1.18 million. Although Mr Harris filed inheritance tax forms, HMRC opened an investigation into the matter. They determined that the amount of inheritance tax payable by the estate was just over £340,000.
Mr Harris sought a review of HMRC’s determination. He argued that he did not have the funds to pay the inheritance tax as he had already distributed the estate to the only beneficiary – Whitfield Harewood (Ms McDonald’s brother). Mr Harris’s explanation was that Mr Harewood had undertaken to pay anything which the estate owed from the money he received. However, after giving this undertaking, Mr Harewood travelled to Barbados (where he lives). Mr Harris stated he had been unable to contact Mr Harewood. None of the inheritance tax bill had been paid.
However, the court denied Mr Harris the opportunity to appeal the tax determination further. Regardless of the alleged undertaking, as Mr Harris was the personal representative of the estate, the court confirmed that he was personally responsible for payment of the inheritance tax.
The court ruled it was no defence:
- that someone else had allegedly undertaken to pay the tax instead; and
- that Mr Harris had been unaware of his inheritance tax obligations.
Personal liability for personal representatives
Essentially, if you are a personal representative, you are personally responsible for paying the inheritance tax bill. This is stated in s. 200 of the Inheritance Tax Act 1974.
This means it is crucial for a personal representative to get confirmation from HMRC about how much inheritance tax is payable before the estate is distributed. As shown in Mr Harris’s case, retrieving assets which have already been distributed could be near impossible.
If Mr Harris had sought legal advice about his obligations as a personal representative, he would certainly have been advised not to distribute the estate until matters were fully completed. As such, he would not have to pay the £340,000 tax bill himself.
To be clear, there will not be a situation where you must pay inheritance tax as a personal representative when the estate has not been distributed. This is because inheritance tax is broadly worked out as a percentage value of the estate, so there won’t be a situation where a tax bill would be more than an undistributed estate could cover. Even so, the potential consequences of personal liability are drastic enough to warrant legal advice. If you are at all unsure about any of your duties, or about the best way in which to proceed, you should consult a solicitor.
Other benefits to using a solicitor to help with estate administration
Paying inheritance tax is far from the only duty a personal representative must meet. Aside from practical considerations, you will have duties to act in the best interests of the estate. For example, you will have a duty to collect debts owed to the estate. You must also follow the provisions of the Will if there is one.
So, what other ways can a solicitor help you with estate administration duties?
A specialist solicitor can provide:
- Detailed knowledge of the law. As demonstrated in the Harris case above, this can prove invaluable. It is a solicitor’s job to know the law, and estate administration is a huge and technical area.
- Distance from the pain or grief associated with a death. If you have just lost someone close to you, dealing with the practicalities of estate administration, and learning the duties you have as a personal representative, are likely to be the last things you want. Using a solicitor can afford some separation between the distress of losing a loved one and the ‘hassle’ of administering an estate.
- The time and experience to deal with onerous estate duties. As mentioned above, estate administration can often be hard work. If you haven’t experienced it before, you will be learning your obligations as you go along. In addition, you will have all the other matters that need seeing to when someone dies. Our free ebook, ‘What to do When Someone Dies’, details many of the tasks and considerations you will face, even if you are not the deceased’s personal representative.
- The ability to handle complicated estates. Some estates will naturally be more complicated to deal with than others. Some situations which add to the difficulty of estate administration include:
- Estates where debts and liabilities outweigh the assets (referred to as an insolvent estate)
- Estates which include property in foreign countries
- Complicated Will provisions, such as those which create elaborate trusts.
Even if you do not engage a solicitor to deal with the estate administration for you, it is always recommended that you consult a solicitor to discuss your legal position. In Mr Harris’s situation, for the cost of a consultation session, he could have saved himself a tax bill of £340,000.
At Roche Legal, we are reassuring experts specialising in:
- Probate and Estate Administration
- Trusts and Estate Planning
- Powers of Attorney
- Court of Protection
- Contested Probate and Will Disputes
Please contact us if you would like legal advice on any of these subjects, or if you wish to discuss anything raised in this article.
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