Lifetime Gifts and Inheritance Tax

Can anyone advise me in regard to lifetime gifts and inheritance tax. If an estate is insolvent but there is inheritance tax on a lifetime gift which is to be paid by the recipient. Can the Executor do anything to force the recipient to pay the IHT so that a Grant of Probate can be sought?

Graham and Rosen

This could be a bit of a “Catch 22” situation as, until an IHT form is lodged in support of the grant application, HMRC might not be aware of the IHT liability on the lifetime gift. If HMRC has no knowledge of that gift until after sufficient time has elapsed that it can assess the estate, it might see this as an easy option.

However, if the estate is insolvent, meaning that its liabilities exceed its assets, the beneficiaries under the will are unlikely to be affected either way as it will be the creditors who would be impacted.

I suggest it might be a case of informing the known creditors, so that they can assess whether or not any of them wants to take a creditors grant.

Whilst it may be suggested that the executors could take a grant, with one or more of the creditors “guaranteeing” their fees, the creditors may baulk at the cost of instructing an insolvency practitioner to advise on the distribution of the estate amongst the creditors (it could otherwise prove costly if the correct insolvency rules are not applied).

Care, though, as if the estate is formally declared insolvent, I believe it may then only be administered by a recognised insolvency practitioner.

Paul Saunders