How to obtain probate when there is insufficient money to pay IHT

[Lootman]

If someone has most of their savings in shares and/or funds/ITs and there is insufficient cash in the estate to pay IHT, how can executors proceed? It does not look as though brokers will let you sell shares without a Grant, which you cannot get before paying IHT!

Yeah, you have to remember that probate does not exist to help the deceased, or the family or beneficiaries of the deceased. It is designed purely to protect the creditors of an estate, mostly the taxman of course.

If someone told me that I had 3 months to live then I would transfer all my assets to my loved ones. That would not legally avoid IHT but it would at least avoid probate. And it would then be for the taxman to claim his pound of flesh rather than putting the onus on the grieving relatives.

Old legal saying - possession is nine points of the law, or some such.

Would that avoid probate? I am not sure. The will still has to be proved and there may be other issues

If my estate is empty, because I gave away all my assets whilst alive, then there would be no need to "prove the will". The will becomes moot and irrelevant if my estate has zero value and there are no debts to repay. Other than requests for a particular type of funeral or statements about personal effects.

A big potential problem I can see with that approach is when there are large unrealised capital gains in the estate. Selling before death would then result in a CGT bill that would be avoided if the disposals were done after death.

Yes, you would lose the resetting of cost basis upon death and that could be worth a lot of money. But that assumes that you will never want or need that money anyway, and so it is basically intended only for your beneficiaries. Right now I am more worried about changes to CGT or IHT that a Labour government might introduce say in 2025.

[hiriskpaul]

From what I can tell about their bereavement service, it is not possible to pay inheritance tax from an account at iWeb Share Dealing. I have directly asked them the question though to confirm.

[Clitheroekid]

[HL's rules are here: https://www.hl.co.uk/help/what-to-do-when-someone-dies

Can the HL investments be sold to help cover funeral costs or to pay for inheritance tax?
Yes. We can issue a Declaration and Indemnity form to the executor(s) or to the self-nominated administrator(s) of the estate instructing this once we’ve received the death certificate.

The ‘Declaration and Indemnity form’ can be used to sell non-pension assets for any of these three reasons:

To hold cash / avoid future market risk
To be used to pay funeral expenses
To be used to pay Inheritance Tax

Please note, any funeral expenses are paid directly to the funeral directors and any inheritance tax payments are made directly to HMRC. We will not make any payments directly to executors or administrators of the estate until we have received sight of the Grant of Probate (or equivalent).

I have the indemnity form.

You should check to see whether there are any charges for issuing an indemnity. If they're anything like the charges for indemnity for missing share certificates it would probably be cheaper to borrow from the local loan shark!

I'm currently acting in an estate where there's a missing share certificate for shares worth about £7,000, and the charge for a replacement with indemnity from Link, the registrars, is £340. Considering that there is effectively no risk of loss that's outrageous.

With regard to the main question most of the sources of cash have been covered in the replies. However, it is possible to negotiate with HMRC for payment by instalments even in respect of property that wouldn't normally be eligible for instalment payments.

And in extreme cases - for example if the entire estate consisted of land - you can apply for a `grant on credit'. This basically means that HMRC will consent to a grant being issued without any of the IHT being paid up front, though such consent will only be given in exceptional circumstances - https://www.gov.uk/hmrc-internal-manual ... /ihtm05121

[UnclePhilip]

I must confess to having been completely unaware that a personal representative can be personally liable for paying IHT:

https://www.gov.uk/hmrc-internal-manual ... /ihtm05122

Even though, in theory, all should be well in the end, there must be some risk being carried?

Sobering....

[hiriskpaul]

[HL's rules are here: https://www.hl.co.uk/help/what-to-do-when-someone-dies

Can the HL investments be sold to help cover funeral costs or to pay for inheritance tax?
Yes. We can issue a Declaration and Indemnity form to the executor(s) or to the self-nominated administrator(s) of the estate instructing this once we’ve received the death certificate.

The ‘Declaration and Indemnity form’ can be used to sell non-pension assets for any of these three reasons:

To hold cash / avoid future market risk
To be used to pay funeral expenses
To be used to pay Inheritance Tax

Please note, any funeral expenses are paid directly to the funeral directors and any inheritance tax payments are made directly to HMRC. We will not make any payments directly to executors or administrators of the estate until we have received sight of the Grant of Probate (or equivalent).

I have the indemnity form.

You should check to see whether there are any charges for issuing an indemnity. If they're anything like the charges for indemnity for missing share certificates it would probably be cheaper to borrow from the local loan shark!

I'm currently acting in an estate where there's a missing share certificate for shares worth about £7,000, and the charge for a replacement with indemnity from Link, the registrars, is £340. Considering that there is effectively no risk of loss that's outrageous.

With regard to the main question most of the sources of cash have been covered in the replies. However, it is possible to negotiate with HMRC for payment by instalments even in respect of property that wouldn't normally be eligible for instalment payments.

And in extreme cases - for example if the entire estate consisted of land - you can apply for a `grant on credit'. This basically means that HMRC will consent to a grant being issued without any of the IHT being paid up front, though such consent will only be given in exceptional circumstances - https://www.gov.uk/hmrc-internal-manual ... /ihtm05121

HL don't charge for the indemnity, but they do make money from the disposals of course.

Thanks for the tip about HMRC being willing to negotiate over up front IHT payments. I was wondering whether that might be
the case and will bear it in mind.

[gryffron]

Currently going through all this with my dad’s estate. No IHT, but my experiences are current.

So there isn't the same problem with savings in banks & building societies? They don't lock those accounts on being informed of the death and require probate before letting the executor(s) access them?

If they individually hold < £10k, both Lloyds and Halifax bank accounts paid out immediately. Used only the DeathNotificationService website. Regardless of the size of the overall estate. i.e. Before probate. Might not help those requiring millions.

I hear on the grapevine that NS&I can be very slow in sending funds from Premium Bonds and Savings Certificates via the DPs to pay IHT, and that might slow down probate (even slower than it is at the moment reportedly)

Took me just 13 days to obtain probate certificate. Online application. October.
NS&I Premium Bonds took 15 days to payout cash. To me, not to DPS in my case. But still amongst the quickest.

Gryff

[Lootman]

I must confess to having been completely unaware that a personal representative can be personally liable for paying IHT:

https://www.gov.uk/hmrc-internal-manual ... /ihtm05122

Even though, in theory, all should be well in the end, there must be some risk being carried?

Sobering....

Yes and that really is something to keep in mind if you are an executor. I would renounce the role if I thought there was anything funny going on with the estate. Or if ther were significant debts and possibly not enough assets to satisfy them.

And in some situations it may not be possible to easily renounce if you have "intermeddled":

https://www.lexisnexis.co.uk/legal/guid ... -estate-01