Steps to Take When Managing An Estate

Receiving an inheritance can be a life-changing event that provides you with new opportunities. But it also requires some careful planning and decision making to ensure that this wealth is handled wisely.

Follow these best practices when acting as an executor and beneficiary of a will in the UK.

 

Pay Any Inheritance Tax Due

If the estate exceeds the current inheritance tax (IHT) threshold of £325,000, any amount above that is subject to IHT at 40%. For example, if you inherit £400,000 and no IHT was prepaid, the amount above £325,000 is £75,000. £75,000 x 40% = £30,000 owed in IHT.

However, there are many exemptions, and it can also be challenging to construct a detailed picture of the estate of the deceased. A suitably qualified solicitor can really help.

 

Pay Outstanding Debts

Before distributing inheritances, any debts like loans, taxes or fees owed by the deceased must be paid from their estate. Review outstanding liabilities and use estate funds to settle them. This provides a clean slate before transferring assets to beneficiaries.

 

Update Ownership of Assets

Once debts are handled, inheritance tax paid and probate is granted then ownership of assets like property, investments and bank accounts must be transferred to the beneficiaries, known as “legatees”. Contact institutions to provide death certificates, a copy of the probate document and the details of the new owner. Some will require additional documentation.

At Fiducia, we can assist with transferring investments smoothly while avoiding unnecessary tax impacts. We can also assist your solicitor with this too.

 

Review Estate Administration

Construct estate accounts detailing any income, expenses, taxes paid, and monies owed. This provides clarity on what the legatees should receive.

This can be complex so seek appropriate legal advice.

 

For the Legatee

Keep sufficient cash on hand for immediate needs and expenses following the loss of a loved one. Avoid hasty decisions like purchasing property or lending money from your inheritance.

Move a prudent portion of your inheritance into accessible cash accounts as you assess next steps.

 

Consider Your Tax Position as a Legatee

How inherited assets may be taxed depends on factors like residency and domicile status of the deceased, and your relation to them. Seek expert tax advice to ensure you comply with inheritance, income and capital gains tax rules.

For example, selling an inherited property in the near term could trigger capital gains tax. An accountant can model tax scenarios and guide your decisions.

 

Align to Your Financial Plan

Carefully consider how an inheritance aligns to your overall financial life plan and goals. Avoid making major changes in haste. Evaluate options like paying off debts, making purchases, or adjusting retirement plans and timelines. An inheritance provides an opportunity to improve your long-term financial position.

 

Review Your Will & Estate Plan and Consider Lasting Powers of Attorney

An inheritance may warrant an update to your own will and estate plan if new assets or intentions are involved. Factor your inheritance into your wealth transfer plans. Update beneficiary designations on applicable assets if needed. Revisiting your estate plan ensures your expanded assets are handled as you want.

Was it difficult to help the deceased manage their wealth in the last few years of life? Consider Lasting Powers of Attorney to help your children help you.

By following these steps, you can carefully manage an inheritance for maximum benefit while honouring the legacy of the deceased. Expert support can help guide significant financial decisions. Being thoughtful and prudent with this gift can make a lasting positive impact.

At Fiducia, our multi award-winning team of Chartered Financial Advisers can help ensure you are fully prepared to receive inheritance in the future to avoid any unwanted/untimely tax liabilities. To have a free initial discussion with a member of our team, contact us below.