Personal Representative: Will I be personally liable?

    Personal Representative: Will I be personally liable?

    It is likely that at some point either you, a family member or a friend will be appointed to act as a Personal Representative of an estate.

    What is a Personal Representative?

    A Personal Representative can be appointed under a Will where they are known as ‘Executors’. If the deceased did not have a Will, under the Non Contentious Probate Rules 1987, they are referred to as ‘Administrators’.

    There are many obligations and responsibilities that have to be undertaken in this role during the administration period. It is important to note that if the appropriate and correct action is not taken, it could lead to a personal liability on you.

    The role of a Personal Representative

    In simplistic terms, the role of a Personal Representative is to:

    • collect in the deceased’s assets
    • discharge any liabilities
    • distribute the balance in accordance with the Will or rules of intestacy
     

    It is, however, important to understand that as a Personal Representative you can be held accountable to third parties, such as creditors, and the beneficiaries of the estate.

    What potential pitfalls should I look out for?

    Unknown debts

    Unknown debts are one of the dangers to a Personal Representative. There are steps which can be taken in order to negate your liability. You should take legal advice to discuss these further.

    Co-Personal Representatives

    If you are a Personal Representative with others, you would be sensible to ensure that you are aware of what they are doing in regards to the administration of the estate as you could be held responsible for their actions.

    Your position

    Whilst you may not think you require a solicitor to deal with the administration of the estate for you, it is always advisable to obtain legal advice in the first instance. This ensures that your position as Personal Representative has been considered and that you are agreeable to take on the role.

    Although the estate may be small, or even insolvent, this does not necessarily mean it is easy or simple. In fact, an insolvent estate may be one which you do not wish to take on as a Personal Representative, given the risk involved.

    The dangers of not using a solicitor: A cautionary tale

    • Mr Harris was appointed as an Executor of an estate.
    • He completed and submitted an IHT account to HMRC in 2013.
    • Almost a year later in 2014, HMRC opened an enquiry.
    • A further six months later HMRC confirmed that the Inheritance Tax liability of the estate was approximately £340,000.
     

    However, during the year and a half, whilst the IHT account was with HMRC for review, Mr Harris released the majority of the estate funds to the deceased’s brother, who was the sole beneficiary. These were released with the agreement from the beneficiary that he would pay all the debts and liabilities, including the Inheritance Tax.

    Unfortunately for Mr Harris, the residuary beneficiary did not adhere to their agreement. He decided to head home to Barbados soon after the funds had been released to him. The Inheritance Tax remained unpaid. Mr Harris has been unable to locate or contact the beneficiary.

    HMRC brought the case to seek payment of the £340,000 from Mr Harris personally. Mr Harris appealed the case because he said that he did not have the funds to settle the outstanding amount due to HMRC.

    The Court held that Mr Harris was personally liable and he now owed £340,000 to HMRC. The Court said that it was no defence to the case that Mr Harris had transferred the estate assets to a beneficiary on the basis that they would be responsible for paying the tax.

    Nor is it a defence that the Personal Representative was ignorant of his obligations to pay the Inheritance Tax owing”.

    Are you Personal Representative of an estate? We can help

    If you are a Personal Representative dealing with an estate, you should very carefully consider your own position in general but especially before making any distributions from the estate funds until all liabilities are settled.

    We are happy to discuss any queries you may have. One of our Legal Advisors can sit down and talk to you in relation to the above and any other estate queries you may have.

    For legal advice on Probate, Tax, Trusts and Wills

    Get in touch

    Related posts