Who bears IHT when no direction in the Will

Trusts Discussion
1

I have a probate where there is no direction in the Will as to who will bear the IHT, thus you would expect the residue to suffer the expense. However, the estate mainly comprises two properties which pass by survivorship to individuals who are not the residuary beneficiaries. I therefore have a situation where the residue is minimal and yet the full impact of IHT is borne here. Have I understood this correctly please?

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The executors and survivors in joint account (the Co-Owners) are both liable for the IHT, with the executors having a right of recovery against the Co-Owners.

Whilst HMRC normally expects the executors to pay the IHT on joint property passing by survivorship, and then recover it from the Co-Owners, the executors can ask HMRC to assess the Co-Owners direct in the first instance. I suggest this is what the executors might do in this instance as they cannot provide any security if they need to borrow to pay the IHT.

I understand that if the Co-Owners do not pay, HMRC can approach the executors for payment, but one would hope that instead it would look to impose a charge over the delinquent Co-owner’s property.

Paul Saunders FCIB TEP

Independent Trust Consultant

Providing support and advice to fellow professionals

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Thanks Paul, very helpful.

4

In the absence of provision in the will the liability for IHT on the deceased’s estate is the liability of the PRs and normally is payable out of residue as a testamentary and administrative expense [IHTA 1984 s200(1)]. This liability extends to property passing by survivorship.

However, the PRs liability for IHT is limited to the value of assets which the PRs receive (thus excluding the property passing by survivorship) [IHTA 1984 s204(1)].

Given, that under IHTA 1984 s200(1) the IHT liability also falls on persons in whom property inherited is vested (ie the other joint tenant) it seems likely HMRC would “go after” the surviving joint tenant [again limited s204(3)].

I don’t believe that there is any priority as to liability as between those listed under IHTA 1984 s200(1).

Malcolm Finney

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