Solicitor acting as executor, and large inheritance tax bill
Discussion
My spinster aunt died over 6 months ago and supposedly had a trust fund in place to support her sister ( another aunt) who has dementia and is in a care home. She paid a contribution to the care home costs as the local council had already exhausted my dementia aunt's estate and needed to top up the amount that the council would give.
My spinster aunt had been using these solicitors to sort her finances for many years and they had power of attorney.
I've just received their table of accounts and aside from the overly optimistic value of my late aunt's bungalow, which I had already told them was way over priced. It seems that the £325K inheritance tax limit has been applied and everything over that has been taxed at 40%. Which they have already paid without consulting me.
My dementia aunt gets 60% of her estate to pay her care costs. If there was a trust fund in place isn't that excused from inheritance tax? I thought it was.
My late aunt had a number of charities that she left reasonable amounts to in her will - I thought they were exempt from inheritance tax too.
It's come as a shock as the inheritance tax bill, which the solicitor informs me, has been paid has taken most of the investment money and there's not a great amount left after the solicitors bills are paid ( which they didn't include in the valuation).
In short, a vastly overpriced property, which won't sell at any thing like the price quoted and is in the hands of the solicitors - so could be on the market for years without a sale. Costing the estate weekly visits ( from the solicitors for insurance purposes) also not mentioned in expenses , gardening fees ( which were) and a constant drain on resources.
It seems to me this scandalous behaviour must be happenning to loads of bereaved families and no one seems to mention it.
I would have expected my late aunt's solicitors to have tried to reduce her inheritance tax bill with regard to her sister's care home costs, which she obviously thought they were doing. Is there a possibility of raising an incompetence case with them? It's difficult because we've only realised that this trust fund wasn't in place.
My spinster aunt had been using these solicitors to sort her finances for many years and they had power of attorney.
I've just received their table of accounts and aside from the overly optimistic value of my late aunt's bungalow, which I had already told them was way over priced. It seems that the £325K inheritance tax limit has been applied and everything over that has been taxed at 40%. Which they have already paid without consulting me.
My dementia aunt gets 60% of her estate to pay her care costs. If there was a trust fund in place isn't that excused from inheritance tax? I thought it was.
My late aunt had a number of charities that she left reasonable amounts to in her will - I thought they were exempt from inheritance tax too.
It's come as a shock as the inheritance tax bill, which the solicitor informs me, has been paid has taken most of the investment money and there's not a great amount left after the solicitors bills are paid ( which they didn't include in the valuation).
In short, a vastly overpriced property, which won't sell at any thing like the price quoted and is in the hands of the solicitors - so could be on the market for years without a sale. Costing the estate weekly visits ( from the solicitors for insurance purposes) also not mentioned in expenses , gardening fees ( which were) and a constant drain on resources.
It seems to me this scandalous behaviour must be happenning to loads of bereaved families and no one seems to mention it.
I would have expected my late aunt's solicitors to have tried to reduce her inheritance tax bill with regard to her sister's care home costs, which she obviously thought they were doing. Is there a possibility of raising an incompetence case with them? It's difficult because we've only realised that this trust fund wasn't in place.
It would be a professional negligence case, not an incompetence one. You would have to prove that they were professionally negligent in the way they managed her affairs in their capacity of Powers of Attorney. Just because they handled things differently to how you may have done, does not make them negligent though.
You might want to get the advice of a tax specialist to review the accounts and to establish whether elements of the estate were mis-declared for tax purposes or could have been declared differently had they also sought the same advice. They would be dutybound to manage the affairs of your Aunt in the most tax efficient manner, so your tax specialist would be first port of call.
Very difficult cases these.
You might want to get the advice of a tax specialist to review the accounts and to establish whether elements of the estate were mis-declared for tax purposes or could have been declared differently had they also sought the same advice. They would be dutybound to manage the affairs of your Aunt in the most tax efficient manner, so your tax specialist would be first port of call.
Very difficult cases these.
I wish you luck. If the house was overpriced and the solicitor paid IHT on that value, then presumably when it sells for less you can claim a refund?
A cousin of mine fell victim to the decrepit 'family solicitor' (appointed by the deceased because they'd played golf together). Despite all warnings to him and the bank £80K was embezzled by a dishonest relative; the solicitor refused to answer calls, the police declined to investigate and it was the mother of all battles to recover losses.
Solicitors should view clients' money with the same care they view their own.
A cousin of mine fell victim to the decrepit 'family solicitor' (appointed by the deceased because they'd played golf together). Despite all warnings to him and the bank £80K was embezzled by a dishonest relative; the solicitor refused to answer calls, the police declined to investigate and it was the mother of all battles to recover losses.
Solicitors should view clients' money with the same care they view their own.
Edited by Simpo Two on Thursday 14th November 19:35
Yep solicitors seem to be even scummier than usual as executors. My grandfather made the same mistake of appointing a solicitor as co executor. Fortunately my uncle was the other co executor so was able to fire the solicitor eventually, but not without paying handsomely for the work done despite it being very badly implemented, including arranging funeral the family couldn't attend.
I'd find a way to fire yours if you can and then see what HMRC will do for you in the circumstances. If there's no coexecutor you may struggle, but you could threaten local press exposure for their conduct and competence? You have my sympathy dealing with this.
I'd find a way to fire yours if you can and then see what HMRC will do for you in the circumstances. If there's no coexecutor you may struggle, but you could threaten local press exposure for their conduct and competence? You have my sympathy dealing with this.
condor said:
it seems to be difficult to sack the executors of a will when they've been chosen to act as executors. That is the issue we have.
I will look into getting a tax specialist though - didn't know they existed.
Do you have an Accountant? There will usually be a tax specialist in the firm they work for or easy enough to find one on-line.I will look into getting a tax specialist though - didn't know they existed.
Why should the solicitors consult with you before the paid the tax? They were the executor and PoA.
What evidence do you have that they overvalued the bungalow?
Who told you there was a trust in place? Do you know for sure there isn't one?
Maybe they judged that it wasn't necessary or cost-efficient.
In any case, you can't just put money into a trust and expect to avoid IHT regardless of the circumstances.
I suggest you meet the solicitor, raise your concerns and hold off on the accusations until you have all the facts.
In the absence of family member being PoA and executor, it's not unreasonable for the solicitor to ensure the upkeep of the property and charge for their time.
What evidence do you have that they overvalued the bungalow?
Who told you there was a trust in place? Do you know for sure there isn't one?
Maybe they judged that it wasn't necessary or cost-efficient.
In any case, you can't just put money into a trust and expect to avoid IHT regardless of the circumstances.
I suggest you meet the solicitor, raise your concerns and hold off on the accusations until you have all the facts.
In the absence of family member being PoA and executor, it's not unreasonable for the solicitor to ensure the upkeep of the property and charge for their time.
The main beneficiary is my other aunt who has dementia and is in a dedicated dementia nursing home whose fees have been topped up by my late aunt. She is obviously unable to query anything. I need to know that there are funds still available to pay her care costs.
The bungalow had been up for sale for some time at the over-valued price before my aunt passed away as she had moved into a rented retirement apartment to be closer to her sister's care home. There had been no viewings.
Another beneficiary, who is not a blood relative, told me there was a trust fund in place for dementia aunt, as funds for her continuing care was the main concern.
I am trying to find out what the solicitor is entitled to do, but it's fairly galling to find out that most of the liquid assets have gone to pay inheritance tax and to be left with the overpriced bungalow. Which could be on the market for ages. It's not in a good location and in poor decorative order.
The bungalow had been up for sale for some time at the over-valued price before my aunt passed away as she had moved into a rented retirement apartment to be closer to her sister's care home. There had been no viewings.
Another beneficiary, who is not a blood relative, told me there was a trust fund in place for dementia aunt, as funds for her continuing care was the main concern.
I am trying to find out what the solicitor is entitled to do, but it's fairly galling to find out that most of the liquid assets have gone to pay inheritance tax and to be left with the overpriced bungalow. Which could be on the market for ages. It's not in a good location and in poor decorative order.
condor said:
I have written to the solicitor mentioning that the Zoopla estimate for the property was the same valuation as ours. Will wait and see what the reply is.
Zoopla is a very vague valuation method. I would get 3 local estate agents to get you a written value to see what they think. that will give you a baseline for todays market and you could work backwards from there if need be looking at previous sold prices and general movements in prices % wise. The reason I say that is because the execurtor could say well at that time the price they used was a fair price but you can then prove otherwise.
Wild allegations in this thread when everything looks to be in order. The deceased chose the executors and the solicitor is entitled to be paid. The estimated tax must be paid first to get probate granted. Any adjustment for actual selling price of house can be made later.
The best way to keep costs down is to do as much of the non-legal legwork yourself as you can.
The best way to keep costs down is to do as much of the non-legal legwork yourself as you can.
I don't think they're wild allegations at all. I've posted everything truthfully and asked if people know if charitable gifts are exempt from inheritance tax. I think they are. My main concern is that my dementia afflicted aunt's care costs are being paid. The large amount of inheritance tax paid has used most of the liquid assets. If the bungalow had been valued at a more realistic price then they'd have been an easy £10K to pay care costs that I wouldn't need to worry that would be available to be paid.
My other concern is how I'm likely to afford the care costs if the provision that I thought had been made, hasn't been made.
My other concern is how I'm likely to afford the care costs if the provision that I thought had been made, hasn't been made.
condor said:
I would have expected my late aunt's solicitors to have tried to reduce her inheritance tax bill with regard to her sister's care home costs, which she obviously thought they were doing. Is there a possibility of raising an incompetence case with them? It's difficult because we've only realised that this trust fund wasn't in place.
There are a few points to have in mind: - a solicitor won't provide estate planning advice without an instruction from his client to do so. So a question is what did your spinster aunt ask them to do in the first place?
- it sounds like no trust was set up. Again, was there a specific instruction to set one up? It's possible that (a) there wasn't; (b) there was a request which led to advice which led to a decision not to; (c) there was and it was ignored/not actioned. Only the last one puts responsibility squarely at the solicitor's door.
- (I'm not 100% sure about this); you can't simply avoid IHT by putting assets into a trust. Assets which are held by a trust self-evidently aren't held by the deceased and so don't form part of the deceased's estate. But (most obviously) if you dump all your assets into a trust and die a year later it's likely that your estate would be hit for a part of the full IHT bill, in just the same way as if you gave everything away and didn't outlive the gift by 7 years. Again, it's possible that timings of the trust idea and your aunt's health/age played a factor in decisions.
Right now you have holes in your knowledge. The best course is simply to get the executor-solicitor to sit down and explain to you in simple terms what they have done, and why. There should not be any need for legalese or any lack of clarity in that process. When something has been done, the question is always "why", so persist until you are happy that you have clear explanations (which isn't the same at being happy with the content of the explanation).
A little bit more information would make a big difference here:
- Is the estate administration being done for a fixed fee or charged hourly?
- What is your association with the estate? Are you a beneficiary of the deceased or the dementia aunt's estate (beneficiary on second death)?
- What value was the gross estate, what amount was given to charity and was that definitely done in their will?
- How much do you think the house is overvalued by in £'s and %
- Are there failed PETs captured in the estate valuation from the payments made to fund the deceased's sisters care prior to death?
Lots of solicitors do not understand the benefits of a trust and just wind them up, once the money is in trust it can pass from generation to generation free of iht for 125 yrs. unless it was an Unusual trust.
If you want to pm me I can get a firm of really good iht specialist to cast their eye over it.
Did they not use 500k as the nil rate band as property related?
If you want to pm me I can get a firm of really good iht specialist to cast their eye over it.
Did they not use 500k as the nil rate band as property related?
Caddyshack said:
Lots of solicitors do not understand the benefits of a trust and just wind them up, once the money is in trust it can pass from generation to generation free of iht for 125 yrs. unless it was an Unusual trust.
If you want to pm me I can get a firm of really good iht specialist to cast their eye over it.
Did they not use 500k as the nil rate band as property related?
Except for the 10 year periodic chargeIf you want to pm me I can get a firm of really good iht specialist to cast their eye over it.
Did they not use 500k as the nil rate band as property related?
You're wrong about the nil rate band
MisterJD said:
Caddyshack said:
Lots of solicitors do not understand the benefits of a trust and just wind them up, once the money is in trust it can pass from generation to generation free of iht for 125 yrs. unless it was an Unusual trust.
If you want to pm me I can get a firm of really good iht specialist to cast their eye over it.
Did they not use 500k as the nil rate band as property related?
Except for the 10 year periodic chargeIf you want to pm me I can get a firm of really good iht specialist to cast their eye over it.
Did they not use 500k as the nil rate band as property related?
You're wrong about the nil rate band
Why wrong about the 500k? If the trust was written well enough it would allow the beneficiary to be nominated for the 500k nil rate band, we use them all the time.
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