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Ask Clare Your Own Question

Clare, Solicitor
Category: Law
Satisfied Customers: 33005
Experience:  I have been a solicitor in High Street Practice since 1985 with a wide general experience.
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My mother passed away a year ago, with probate granted in

Resolved Question:

My mother passed away a year ago, with probate granted in may. I am concerned that the executor/solicitor has not distributed the estate. He is awaiting final HMRC approval of the house valuation. In doing so, we as beneficiaries are likely to see a higher than necessary tax bill.
I also suggested to him in June that the bulk of the estate could be distributed, pending HMRC approval. The risk as I understand it is that HMRC may challenge the valuation of the house from September 2015, which was £365k. If so, the executors are liable for additional inheritance tax @40% on the difference.
My suggestion was that it was extremely unlikely that HMRC could value the house higher than £415k, given we're marketing at £395k and seeing offers at £375k.
Therefore a contingency of 40% * (£415k - £365k) = £20k felt more than enough, and could be retained whilst releasing the remainder. It may be that this cannot be done, and does place the executors at a theoretical risk.
The related issue is that with the land registry remaining with the estate, if the house sells for more than £365k, the estate is liable for inheritance tax, again at 40% of the difference. I think it likely we'd sell for around £380k, meaning a bill of £6,000.
However, if the house is transfered pre-sale, the increase is treated as capital gains tax, and within the annual allowance for the beneficiaries so no tax is due.
In other words, I think a low probability of tax due to HMRC is being used as a reason to incur a high probability of tax due to sell price. This doesn't seem to be in our interests.
Is the solicitor's approach reasonable, or the grounds for a complaint?
Submitted: 1 month ago.
Category: Law
Expert:  Clare replied 1 month ago.

Thank you for your question

My name is ***** ***** I shall do my best to help you

Are all the Residuary beneficiaries willing to accept the transfer of the property into their joint names?

How much is the rest of the Estate worth?

Customer: replied 1 month ago.
The beneficiaries are myself and my brother, with an even split and we are equally frustrated. The estate is just over £650k, given we have been told a small amount of IHT has been paid already based on the independent valuation of the house and the cash assets. I haven't seen the draft accounts (similarly, the solicitor doesn't want to share them) but my assumption is the estate is £365k in property, and around £300k in cash. Thus any change in HMRC valuation will affect the IHT.
Expert:  Clare replied 1 month ago.

Who is the other Executor?

Customer: replied 1 month ago.
The other executors are long-standing friends of my mother. I have spoken with them many times; they are also frustrated. A month or so ago the solicitor sent the land registration form to myself, my brother and the other executors to sign, in readiness for HMRC. They signed the land registration form and delivered it to the solicitor in the belief it would be expedited and were shocked when I told them he was keeping it on file pending HMRC. They have previously emailed him to encourage a rapid dispersal.
Expert:  Clare replied 1 month ago.

Are the other executors prepared to indemnify the third in respect of any loss of there is an early distribution?

Are you and your brother willing to do so?

Customer: replied 1 month ago.
We would need to talk about that, and retain that contingency separate from other accounts until HMRC confirms. In principle, yes. If that is in place, is there any other legal requirement that prevents the change of land registry or dispersal of the estate?
Expert:  Clare replied 1 month ago.

The Executor is acting very properly and protecting himself and his firm from any loss or claim.

I would agree that he is being a little over cautious - but a written indemnity and a Retention should suffice to allow the Transfer of the Property into the name sof the Beneficiaries

The Retention should be held in the Solicitors client account.

I would suggest that you arrange a round table meeting to make the proposal and ask that they prepare the necessary indemnity.

I hope that this is of assistance - please ask if you need further details

Clare, Solicitor
Category: Law
Satisfied Customers: 33005
Experience: I have been a solicitor in High Street Practice since 1985 with a wide general experience.
Clare and other Law Specialists are ready to help you
Customer: replied 1 month ago.
Thank you for your response - one minor clarification: I understand HMRC is obliged to address the valuation within 4 years of death. Given that potentially long timescale, is the Retention and Indemnity a common device in these situations? Otherwise a cautious Executor could reasonably retain the estate for that period. I imagine there is a common practice normally adopted?I would say that we have suggested the Retention a number of times without success, but possibly the Indemnity will help.

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