How do you pay Inheritance Tax when you have no access to the funds?

If inheritance tax (IHT) is due on an individual’s estate following their passing, this must be paid to HMRC before they will provide authorisation to the probate registry. Until HMRC have authorised the forms, the probate registry will not issue the grant. 

This can cause serious issues given assets such as bank accounts are frozen until probate has been granted. 

There are a few options for executors:

• They can use the direct payment scheme whereby the executors can ask banks, building societies or investment brokers of the deceased to send the IHT payment directly to HMRC before probate is granted, by completing a form IHT423
• The executors or beneficiaries of the estate can loan the monies from their own personal funds to settle the IHT payable. Once probate has been granted, the loans can be repaid from estate assets. 
• The executors can take out a loan from a bank and secure it against assets of the estate. 
• Executors could consider using the instalment option providing the estate has the relevant qualifying assets then it can pay HMRC over a longer period. 

Reviewing your estate in advance is the best planning you can do as we can look at any ways in which to mitigate Inheritance Tax exposure. This could then avoid the issue of having to settle an IHT liability on death.

How can Charlton Baker help you?

Here at Charlton Baker we are qualified do deal with all of your Wealth, Will and Probate matters. Please visit our Wealth, Wills & Probate Services page, or contact us for more information. 

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