A friend of mine had some involvement in bringing an important case to Court. The result of the case was that the defendant incurred a penalty of £87,000 for failing to disclose to the executors of his late father’s will that he had received a gift of £450,000 from his father whilst he was still alive.
The executors had asked all beneficiaries of the estate if they had received any lifetime gifts. The beneficiary in this case did not respond and as a result the executors submitted the Inheritance Tax Return (IHT400) to the effect that there were no lifetime gifts within 7 years of the date of death.
However, HMRC received a tip-off that there had been this lifetime transfer into a Swiss bank account for the benefit of the defendant in this case. HMRC assessed that there was a charge to tax of £47,000 for the unpaid IHT which the defendant then duly paid. HMRC also imposed a penalty of £87,000 which was appealed by the defendant but upheld by the Court.
If you are appointed executor therefore it is imperative that you do ask all potential beneficiaries if they have received any lifetime gifts. In this case the defendant did try to argue that the executors had not asked him clearly enough about any gifts. The Court did not accept the argument and said that the executors were entitled to rely on responses, or in this case lack of responses, to their questions. However, the executors could have found themselves liable for part of the penalty if they had not asked the question at all.
About the author
Roger Pratt is a Partner and Head of the Private Client Department of Hopkins Solicitors LLP, and a member of the Society of Trust and Estate Practitioners. If you have a legal question on Wills, Probate, Intestacy, Trusts or any related matter, please contact Roger.