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Executors can become liable to pay deceased's income tax themselves

Executors can become liable to pay deceased's income tax themselves

Two executors who accidentally under-declared the deceased's income for his final year, and then distributed the residue of his estate without waiting for HMRC's clearance, have been told that if they cannot recover the funds they distributed, they will have to pay the tax from their own pockets. 

They must now try to recover the legacies they paid out to beneficiaries in order to pay £14,500 in extra tax that they now owe HM Revenue & Customs. 

The general rule is the executors have a personal liability to settle any debts or liability properly due and payable from an estate that they are administering in as far as the estate is sufficient to meet that liability, whether the executors have retained sufficient assets to meet the liability in question or not.

As shown in this case, a decision not to take professional advice on the administration of an estate could end up costing the executors dearly; it also highlights the fact that executors cannot expect any allowances to be made by HMRC for inexperience or lack of legal or tax knowledge.

However, there are sensible steps which can be taken by executors to avoid problems when it comes to discharging debts and liabilities as part of estate administration.

If you would like advice and guidance on this or any other matters relating to Wills, Probate or Inheritance Tax Planning please contact Iain Robson on 01325 466461 or email iain.robson@close-thornton.co.uk

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