The recent case of Usher & Perkins v HMRC serves as a timely warning for those who administer an estate without the help and advice of professionals. The case is reported at a time when there appears to be an ever increasing number of individuals making personal applications for grants and dealing with the administration of estates without employing professional assistance, often on the basis that the estate is “straightforward” and there is a “cost saving” to the beneficiaries.

Extent of Liability

In this case the executors had to try to recover payments made to beneficiaries to settle a tax liability. The report notes the PRs were experiencing problems in recovering contributions from some of the beneficiaries. The executors’ personal liability with the underpaid tax, interest and penalties exceeded £20,000!

Personal Liability

Executors and Administrators (PRs) have a personal liability to settle any debts or liability properly due and payable from the estate they are administering in so far as the estate is sufficient to meet that liability. Where there are insufficient assets to meet the debts then there is a clear order in which payment must be made; failure to do so can lead to personal liability on the part of the PRs. In all estates where the extent of debts and liabilities is uncertain we at Silks Solicitors place appropriate statutory advertisements. If PRs distribute the estate after the end of the 2 months time limit they are protected from personal liability if a creditor is subsequently discovered. In such cases the creditor must seek payment of his liability from the beneficiaries of the estate directly and not seek redress against the PRs personally.

A sobering warning!

This case serves as a sobering warning to PRs who choose to act personally and without proper professional advice. No “allowances” will be given to PRs by HMRC or other creditors for inexperience, lack of knowledge or any of their mistakes, which may not become apparent until well after the estate has been distributed.

In this case, as with many others, any “cost saving” was undoubtedly negated by the later costs the executors had to fund personally to deal with the HMRC claim. In addition the PRs will now bear any shortfall they may never recover from any reluctant beneficiary in respect of their proportion of the tax liability.

Professional costs are payable by the estate and are borne proportionately by the residuary beneficiaries. Silks Solicitors will ensure there are no premature distributions to the beneficiaries (even when there may be pressure to do so) thereby minimising risk to the PRs.

Remember – your duties and obligations as PR last for your lifetime and may extend to your own PRs following your death!

If you decide not to take professional advice to assist you with the administration of an estate, due to a desire to save costs or simply that things appear straightforward, then think:  Is it worth the risk to potentially incur a personal liability that may not be recoverable from the beneficiaries if you haven’t done things correctly?

If you’d like peace of mind regarding the administration of an estate, Silks Solicitors can help.  We’ve helped hundreds of people across the Black Country with estate administration.  Call us today on 0121 511 2233 to speak to one of our probate experts.