Raising Money to Pay Inheritance Tax

You can't get your hands on the money or property of the deceased until you obtain grant of probate or letters of administration. However, before you can be granted probate or letters of administration you must pay the tax-collector if the estate is worth more than £300,000 (2007/08 tax year) or £312,000 from April 2008.

This leaves you in a catch-22 situation. If you can't sell bits of the estate or access the deceased's bank accounts, how on earth do you raise the cash to pay any tax due?

Don't worry – you can call on the following people and organisations to give you a helping hand with meeting the IHT bill:

Raising Money to Pay Inheritance TaxNational Savings. If the deceased had National Savings accounts, you can ask to use the funds to pay HMRC. In effect, what you're doing is getting one branch of the Government to pay another.

Raising Money to Pay Inheritance TaxBeneficiaries. If a beneficiary has already financially benefited from the deceased's death – such as a lump sum payment from a pension provider, which is not included in the probate process – you could ask him or her to use this money to meet the IHT bill. The beneficiary will get their money back from the estate when it has gone through probate.

Raising Money to Pay Inheritance TaxBuilding society and bank accounts. Most building societies and some banks will release money to pay IHT without a grant of probate or letters of administration. However, the building society or bank may insist on sending the money directly to HMRC.

Raising Money to Pay Inheritance TaxPersonal possessions. As an executor, you have the right to sell the furniture and personal possessions of the deceased from the moment of death. However, administrators (where there's no will) are not allowed to sell the personal possessions of the deceased until they have obtained letters of administration.

Raising Money to Pay Inheritance Tax

If you need to sell the personal possessions of the deceased, make sure you let the nearest and dearest know what you're up to. They can let you know if an item has some sentimental value and shouldn't leave the confines of the family. Also, check that the deceased didn't leave the item to someone in the will!

If you can't raise enough cash to meet the IHT bill through these measures, you will have to borrow the funds.

Raising Money to Pay Inheritance Tax

Some bright sparks take out a life insurance policy specifically designed to cover any IHT bill due on their death. Head to Chapter 16 for more on this tactic.

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