In completing the Inheritance Tax forms in an estate, the executors have a duty to disclose not only all the assets that the deceased owned at death, but any gifts he made within the seven years before he died. A failure to do this can result in financial penalties being raised on the executors personally which can be up to 100% of the inheritance tax due. However, in a case last year, the tax tribunal held that it was the recipient of a gift, not the executors, who was liable for the penalty.
In the case, seven months before he died the deceased had gifted an undeclared Swiss bank account to his son. The executors had checked with all the family members and the beneficiaries of the Will as to whether anyone had received any gifts, but the son had failed to inform the executors of the gift. However, the lifetime gift to the son came to light following an anonymous tip off to HMRC.
Because the executors were able to show that they had asked everyone at least twice, in writing about lifetime gifts, it was held that they had done all they could to ascertain the existence of such gifts and so the penalty was transferred from the executors to the son.
So what can we learn from this case?
- If beneficiaries are not sure whether a lifetime gift should be declared, they should tell the executors about it and then it will be the executors responsibility to declare the gift if necessary.
- Executors must makes sure they get answers to all their enquiries.
- Executors must carry out research into all areas of the estate.
- Executors must document all enquiries that they make.
- If the executors or beneficiaries are not sure of what should be declared, they should seek professional advice.