Payment of Debts

The PRs are responsible for paying all debts owed by the deceased before distributing the estate to the beneficiaries. The PRs may be personally liable for any debts if they distributed the estate without making sure that the creditors have been paid first. You should use the statutory notice procedure to advertise for creditors- if you need help with this, get in touch with us.

If the deceased person’s debts are insufficient to cover the debts, the estate is insolvent and special rules apply- we can also advise you on this.

HM Revenue and Customs will agree the extent of any liability for IHT after examining the IHT return that was filed by the PRs. This might take many months because HMRC may wish to negotiate with us over values. However, we will always do our best to keep things moving forward as quickly as possible for you. Once the IHT liability is agreed and paid, a clearance certificate is issued by HMRC.

Any income that the assets earn during the administration period (period between day after death to the day the PRs finish distributing the assets) will need to be declared for income tax purposes. If any assets are sold, there could be capital gains tax to pay.

Once all of the assets have been realised and the debts, administration expenses and tax have been paid, the rest of the estate can be transferred to the beneficiaries. The PRs should also prepare certificates for the beneficiaries, displaying the income received during the administration period and the resulting income tax which has been deducted from it.
If the beneficiary is a non-taxpayer, they can recover all or part of the tax paid by the PRs.
If the beneficiary is a higher-rate taxpayer, they will have to pay additional tax via their own tax return.

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