The tax is usually paid out of the funds in the estate, or from money raised from the sale of assets if the estate has no cash. However, you may not want your beneficiaries to sell the assets as it maybe difficult for them to purchase another similar property due to the size of the Stamp Duty.
Sometimes, the deceased has left money in their estate to pay this tax. They may also have arranged for a life insurance policy to cover this bill. This is is an important consideration.
If there is a Will, it’s usually the executor of the will who arranges to pay this tax.
If there isn’t a Will, it’s the administrator of the estate who does this.
Once the tax and debts are paid, the executor or administrator can distribute what remains of the estate to the heirs.
When is the tax paid?
Inheritance Tax is normally paid within six months after the person’s death. If the tax is not paid within six months, HMRC will start charging interest.
HMRC can give the executor of the estate more time to pay the tax if certain assets in the estate, such as property, take a while to sell.
In this situation, your executor can ask to pay the tax in yearly instalments. But the outstanding amount of tax will still get charged interest.
If your estate is likely to incur Inheritance Tax, it’s a good idea for your executor to pay some of the tax even before they finish valuing the estate.
This will help the estate avoid getting charged interest if it takes longer to sell the assets to pay off the debts and taxes.
If the executor or administrator is paying the tax from their own account, they can claim it back from the estate.
Please contact me on [email protected] or 0800 061 4494 to find out how I can best help you protect your family and your assets.