Duties of an Executor or Personal Representative

Being designated executor of a Will can be daunting, as it is an important role with legal responsibilities. We guide you through what legal requirements of the executor or personal representative

Determining lifetime gifts

As executor to an estate, HMRC will place a duty upon you to make reasonable enquiries as to whether any gifts have been made within 7 years of the date of a death. This is to ensure that where necessary gifts have been accounted for in their tax return that a personal representative will be required (in some cases) to submit to HMRC to apply for the Grant of Probate.

Given the Government’s clampdown on tax avoidance, HMRC are likely to be unsympathetic if you fail to make reasonable enquires in relation to gifts, and could levy substantial penalties upon you personally, whether or not any inheritance tax needs to be paid from the estate. Any penalties would fall upon you personally as the personal representative or executor rather than upon the estate’s assets.

It is therefore recommended that you make enquiries with family members, friends, people named in the Will (if there is a Will in place), Solicitors, Accountants and Financial Advisors and keep a record of the enquiries that you have made and the responses that you have received.

It is also recommended that you obtain and review 7 years’ of bank statements for all accounts and make enquiries with the bank about any payments over £250 which are either unreferenced or you suspect might have been a gift.

Gifts take many forms and can sometimes be something we would not consider a gift.

Examples of gifts include:

• any transfer of assets to or for the benefit of another person, charity, organisation and/or trust fund;
• any trust created during the lifetime of a deceased person and/or any trust which the deceased brought to an end during their lifetime;
• any contributions made by the deceased to purchase assets for another person, charity, organisation and/or trust fund; or
• any premiums paid on a life policy for the benefit of another person.

Advertising to find beneficiaries and creditors

Personal representatives / executors are under a duty to pay all debts of the deceased whether or not they are aware of such debts. Even if you have otherwise acted in good faith when distributing assets to beneficiaries as a personal representative you are still potentially personably liable to creditors if they have not been paid.

A personal representative may therefore be concerned that after the distribution of an estate has taken place that a creditor who was previously unknown comes out of the woodwork claiming that the personal representative needs to make good personally any unpaid debts.

There is statutory protection available to you as a personal representative in that you could advertise in the London Gazette (and in a local newspaper where the deceased held any Land) giving notice of the intention to distribute the estate and asking anyone who believes that they are owed monies from the estate to come forward within a period of 2 months from the date of the advertisements. This will protect a personal representative from any claims from creditors provided that s/he were reasonably unaware of such a claim. The adverts do not protect beneficiaries of an estate against such claims.

The placing of adverts could encourage any beneficiaries to come forward if their whereabouts are unknown.

It is advisable to carry out the adverts in order to account to HMRC properly for the value of the estate and to show that reasonable enquiries have been made to establish the gross and net values of an estate.

Conducting a Will search

The Law Society recommends that a Will Search is carried out to search for any registered or unregistered Wills.

The Will search offers personal representatives protection against administering the estate incorrectly by their assuming that there is either no Will in place or that the Will they have sight of is the most current Will of the deceased.

Finding financial assets and digital assets

Personal representatives are under a duty to identify all assets comprised in a deceased person’s estate and personal representatives / executors may be unaware from the paperwork of a deceased person of any forgotten or unknown assets.

This is particularly true of digital assets consisting of PayPal accounts or which are often unknown to a personal representative.

It may therefore be advisable to carry out a Financial Assets Search and to search bank statements for evidence of any payments being made to online providers or entries which show purchase or sale of Bitcoin or other digital assets.

Genealogy – getting the Family Tree right

Personal representatives have a duty to distribute an estate in accordance with the terms of the Law. Where a person dies without a Will (or there is a Will in place that provides for a class gift such as “to all my nieces and nephews”) there is a risk to personal representatives. If the executors are deemed to have distributed the estate incorrectly, there could be a claim against the estate which could render the them personally financially liable for any mistakes that they have made.

Family relationships can be complex and can often not be as they first appear, so it is advisable that research is carried out by a genealogist to construct a family tree so that the executors of the Will can identify all those entitled.

Determining Section 160 valuations

Personal Representatives and Executors are under a duty to account to HMRC properly for the value of a deceased person’s estate at the time of their death. HMRC requires that any property be valued in accordance with a Statutory definition referred to as a Section 160 valuation. This is:

The price which the property might reasonably be expected to fetch if sold in the open market at that time; but this price shall not be assumed to be reduced on the grounds that the whole property is to be placed on the market at one and the same time.

It is recommended that a surveyor is instructed to prepare a written valuation report of the value of any Land in accordance with Section 160 to ascertain the open market value of any Land as at the date of death. The Surveyor should be asked to assess whether there is any development potential which is commonly referred to as ‘hope’ value.

Similarly, if there are any personal items of any value in the estate, it is recommended that a suitably-qualified valuer be asked to prepare a written report of the value of each personal item in accordance with Section 160.

It will be important to ask family and friends whether any personal items have been loaned out to them or are being kept on behalf of the deceased so that they were been kept securely to ascertain the full extent of the personal items in the estate.

Help with Wills and Probate

If the thought of having to run a section 160 valuation of property belonging to a dead loved one fills you with dread, or you shudder at the prospect of building an accurate family tree to find beneficiaries, we can help.

The Cunningtons Wills and Probate team have plenty of experience when it comes to dealing with probate and administering a Will. Contact us for guidance at this difficult time.

Visit our branches for more information: Braintree, Brighton, Chelmsford, Croydon, Hornchurch, Solihull and Wickford.