18 June 2018
Named As An Executor In A Will? Be Careful!
It is easy to agree to be someone’s executor, but a lot harder actually to do the job. When you said yes to being an executor it was probably many years – usually decades – before you had to do anything. You may even have forgotten all about it. When the time comes, the job is often more complex than expected, and it’s easy to make small mistakes with big and expensive consequences.
One legal quirk that often takes executors by surprise is that an executor becomes the owner of the estate property and money as soon as the person who makes the will dies. This does not mean that the executor can do what they like with the assets – because they own them on trust for the beneficiaries – but they have to look after them and maintain them. For instance, they must make sure that property is insured.
Another oddity is that an executor can become personally for the debts of the estate, including any tax payable. There was an example recently of how an executor acting with the best of intentions can be left high and dry. A Mr Glyne Harris was the executor of the sizeable estate of the late Mrs Helena McDonald. The main beneficiary was Mrs McDonald’s brother, Mr Whitfield Harewood. Mr Harris paid out estate funds to Mr Harewood on the understanding that he would meet the tax due on the estate.
But Mr Harewood left for Barbados and failed to pay the tax. Mr Harris was unable to contact him, and the Inland Revenue said that Mr Harris himself had to pay the tax of £340,000. Mr Harris appealed to the tax tribunal, but this was turned down. Ignorance of the law is no defence, said the tribunal judge.
The case is a salutary reminder for executors of the need to ensure that funds are retained to meet the estate’s potential liabilities (including tax), before making distributions to beneficiaries.
Case: Harris v HMRC (2018) UKFTT 204 TC
For more information about being an executor or personal representative of an estate, click here.