Pitfalls of Inheritance Tax and how to pay it!
You must pay Inheritance Tax by the end of the sixth month after the person died.
You and your executors need to understand this part of the probate process.
Your executors and beneficiaries, who are often the same people, should have access to money to pay the IHT bill.
Having money in a trust so that beneficiaries can pay the IHT bill is a simple option. This can be done by using a life policy.
On death, trustees make a claim on the life policy and the amount of the claim falls into trust. This is outside the estate and the probate process. Therefore, the cash can be used to pay the tax bill, so releasing the estate which can then repay the beneficiaries of the trust before the estate is settled.
The beneficiaries of the estate and the executors are in a catch 22 position as probate won’t be granted on the estate until the tax is paid and normally the tax would be paid from the estate.
The alternative to having the cash available from trust is the beneficiaries pay the tax from their own sources and reclaim from the estate or the executors borrow from a bank, with all the associated costs so that payment can be made therefore probate granted.
HM Revenue and Customs (HMRC) will charge you interest if you do not pay by the due date!!!
Talk to Buxton Beresford Wealth to create a plan to enable you to pass your wealth better to your family
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