I am acting on behalf of the Executors of a person who died in a gas explosion at his house. The house was destroyed in the blast. The Executors are making a claim on the buildings insurance. It appears there will be a pay-out on the policy- the amount is yet to be determined. The Local Council is making a claim against the estate. This claim is because the Council incurred expense due to the explosion - they had to make safe the surrounding area; install gas monitors in surrounding houses etc. The Council’s claim is being dealt with directly by the Loss Adjustors employed by the insurance company in question. Another legal firm is acting on behalf of the Executors in respect of potential liability matters. They are challenging the Council’s claim. We guess this process will go on for sometime. There may also be other claims against the estate and the estate itself may be able to make claims against other entities that are involved. There will be IHT payable in respect of this estate. My questions are: Does any member know if any proceeds from the insurance claim would be considered as part of the estate for IHT purposes (even though the amount to be paid out will be decided much later than the date of the deceased’s death)? Would any successful money claim against the estate be considered as a debt of the estate for IHT purposes? Would the proceeds from any successful claim by the estate against any liable body be considered part of the estate for IHT purposes? Thank you in anticipation. T. Dales
Presumably the insurance policy will be owned by the same persons who owned the property and that this is either the deceased alone or jointly with another or others.
His estate therefore comprises at least the following or his share of them as the case may be:
1 the house at its damaged value
2 the insurance policy proceeds
3 any claims against third parties
Less:
- The costs of making good the damage
- Any claims by third parties against the deceased’s estate
HMRC will accept that items 2-5 subsist at the date of death. S4 IHTA strictly ordains that the transfer of value occurs immediately before death but s171(1) will permit the effects of the incident to be taken into account. They will acknowledge that quantification of these items will take time.
The optimum strategy is to engage with them on a full disclosure basis early on with a view to avoiding delay in obtaining probate by agreeing an IHT position that can be adjusted up or down later when the figures are finalised. HMRC will take a view on the exposure of the Exchequer, in the light of other assets in the net estate if any. Whether it will be prudent or possible to pay other debts or make distributions will depend on the facts but dealing with a potentially insolvent estate may perhaps be a possibility.
Jack Harper
Presumably the insurance policy will be owned by the same persons who owned the property and that this is either the deceased alone or jointly with another or others.
His estate therefore comprises at least the following or his share of them as the case may be:
1 the house at its damaged value
2 the insurance policy proceeds
3 any claims against third parties
Less:
-
The costs of making good the damage
-
Any claims by third parties against the deceased’s estate
HMRC will accept that items 2-5 subsist at the date of death. S4 IHTA strictly ordains that the transfer of value occurs immediately before death but s171(1) will permit the effects of the incident to be taken into account. They will acknowledge that quantification of these items will take time.
The optimum strategy is to engage with them on a full disclosure basis early on with a view to avoiding delay in obtaining probate by agreeing an IHT position that can be adjusted up or down later when the figures are finalised. HMRC will take a view on the exposure of the Exchequer, in the light of other assets in the net estate if any. Whether it will be prudent or possible to pay other debts or make distributions will depend on the facts but dealing with a potentially insolvent estate may perhaps be a possibility.
Jack Harper