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When someone passes away, their Personal Representatives may need to take out a Grant of Probate (if there was a Will) or a Grant of Letters of Administration (if there was no Will or there are no Executors).
While most estates are dealt with in a timely manner, it is not uncommon for it to be months (and in some cases years) for the estate administration process to be started, especially where the deceased held an interest in a property that their surviving spouse or children continued to live in.
If you are the person responsible for dealing with someone's estate, certain key dates and deadlines need to be kept in mind.
Six Months from the End of the Month of Death
Inheritance Tax is due. For example, if the deceased died in February 2023, Inheritance Tax is due by 31 August 2023. If the Inheritance Tax is not paid by the deadline, interest will start accruing. The rate of interest payable changes from time to time and tracks the Bank of England base rate, plus 2.5%.
The current and historical rates of interest can be found on the GOV website.
Within 12 Months of the Date of Death
If the estate owned certain shares and investments which, when adding all of the sales together, sold for a loss in the 12 months after the death, Inheritance Tax can be reclaimed on the loss. The claim must be made within 4 years from the end of that period.
If the personal representatives need to complete a full Inheritance Tax account (IHT400), it must be submitted within 12 months of the date of death; otherwise, a penalty will be payable, and of course, interest will also be accruing on any unpaid Inheritance Tax. The penalty starts at £100 but can be up to £3200, depending on the circumstances.
Within 2 Years of the Date of Death
If you are a beneficiary of an estate and do not need (all of) the inheritance you are entitled to from the estate, you can do a Deed of Variation to re-direct (part of) your inheritance to another person.
The redirection can apply to both the Inheritance Tax and Capital Gains Tax treatment of the inheritance as if the redirection had been made by the deceased. This can be a useful tax planning tool.
Within 2 Years of the End of the Month of Death
If the estate needs to claim Inheritance Tax allowances from a spouse or civil partner who died before them, any application must be submitted to HMRC in this timeframe.
The allowances that can be claimed are the Transferable Nil-Rate-Band and the Transferable Residence-Nil-Rate-Band. These two reliefs can save £200,000 in Inheritance Tax and are not automatic, so they must be claimed.
Within 4 Years of the Date of Death
If any land sold in this period is sold for an overall loss, it is possible to reclaim Inheritance Tax on the loss. Any claim must be submitted within 7 years of the date of death.
10 Months from Obtaining the Grant (of Probate or Letters of Administration)
If anyone was financially dependent on, or married/in a civil partnership with, the deceased, and there is concern that a claim may be made against the estate under the Inheritance (Provision for Family and Dependents) Act 1975 personal representatives should wait 10 months from the issuing of the Grant before making any distributions from the estate.
This is because the claimant has 6 months from the date of the Grant to issue a claim and a further 4 months to serve that claim on the personal representatives.
2 Months from Placing Adverts for Creditors
In most cases, it is advisable for personal representatives to place "Section 27" notices, advertising for any creditors of the estate. If the adverts are not placed, the estate is distributed, and creditors later come forward, the personal representatives can be liable personally for the debts.
If the adverts are placed, no creditors come forward within 2 months of the date the adverts are placed, and the personal representatives distribute to the estate; as long as the personal representatives were unaware of the debts, liability will transfer to the beneficiaries.
If you are a personal representative or beneficiary of an estate, you should keep the above dates in mind. If you are a personal representative, you have certain duties to comply with, including administering the estate on time, and you may be personally liable for any loss caused by not meeting the above deadlines.