The legal process of administering an estate after someone passes away can be complex and challenging to navigate, particularly for individuals attempting to handle it without professional assistance.
In this collection of legal blogs, we present a series of case studies illustrating the issues individuals may encounter when taking on the role of executor without seeking legal advice.
Case study 3 – James
James is the sole executor of his late father’s Will.
James's situation
As the sole executor and one of the beneficiaries (alongside his two siblings) to the estate, James successfully submitted a personal application and obtained a grant of probate. James subsequently distributed most of the assets. The estate included a rental property and due to the market conditions, James and his siblings decided that they would hold on to the property and continue to rent it out. After a year, the tenant gave notice to vacate, and James decided to sell the property. James used a conveyancer to assist with the sale and then distributed the proceeds between himself and his siblings.
How things went wrong
Over a year after the sale, James received a letter from HMRC advising that the estate had not dealt with the income tax liabilities. Two weeks later, James received a further letter from HMRC stating that capital gains tax (CGT) was due on the previous sale and that they were now investigating the liability.
Despite the estate's apparent simplicity, income tax obligations arising during the administration period and potential CGT liabilities upon the sale of the property went unaddressed. This oversight meant HMRC charged late filing penalties and daily interest for late payments. James had also already distributed the estate in full to the beneficiaries, which meant he was personally liable for the outstanding amounts due to HMRC.
Speaking to a lawyer, and solving the issues
Recognising the seriousness of the situation, James sought urgent legal advice. The lawyer advised James that the estate should have been registered with HMRC, with all income tax and capital gains tax details disclosed and any associated liabilities settled prior to any distributions. Unfortunately, as the property had already been sold, James was unable to take any steps to mitigate the capital gains tax (CGT) liability. Had James sought legal advice on CGT at the time, the liability could have been lowered significantly, if not, completely.
The lawyer was able to assist James with registering the estate, completing the relevant returns, and appealing the penalties with HMRC. Thankfully, James’s siblings agreed to pay towards the liability voluntarily, sparing him from personally settling the amounts or pursuing legal action. Within months, the matter had been reconciled, and James felt peace of mind that HMRC would not be pursuing him personally in the future.
Summary: the benefits of professional legal advice
James’s experience highlights the risks associated with attempting a DIY probate and the benefits of engaging professional legal representation. By partnering with a lawyer, individuals can avoid common pitfalls, streamline the probate process, and ensure compliance with legal requirements. As this case demonstrates, seeking legal assistance early on can save time, mitigate stress, and ultimately lead to a smoother process.
For expert legal assistance with probate matters, contact Baker Law Solicitors at privateclient@baker-law.co.uk.
This case study is provided for informational purposes only and does not constitute legal advice. Readers are encouraged to consult with a qualified lawyer for personalised guidance tailored to their individual circumstances.
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