If you’ve been left money or a share in someone’s estate, you may be wondering what liabilities you have. Do you need to pay tax on the money, and who is responsible for clearing any debts the deceased may have left?
After someone dies, their personal representative is responsible for winding up the estate. It is their job to collect in all the assets, sell any property and pay debts, including tax liabilities. Once this has been done, they will then distribute the funds in accordance with the Will or, if no Will was made, under the rules of intestacy.
Who is responsible for making payments from an estate?
If a Will was made, this will usually name a personal representative, known as an executor. If there was no Will, the Probate Registry will appoint an administrator.
This is the person who will be responsible for gathering in the money and settling any bills.
Debts are payable in a set order.
- Secured debts such as a mortgage
- Reasonable funeral costs
- Estate administration expenses
- Payments due to employees
- Unsecured debts
Estate administration expenses
These are usually the main expenses to be dealt with when winding up an estate and include the costs incurred by the personal representative, such as probate fees, estate agency and valuation fees, Income Tax and Inheritance Tax.
Making payments to beneficiaries
Once all of the debts have been paid, then the estate can be distributed to the beneficiaries. Personal possessions will be passed in accordance with the terms of any Will.
Cash payments are made in a strict order of priority.
Firstly, specified gifts of money are made to named beneficiaries.
After these have been paid, the residue is divided in accordance with the terms of the Will. A residual beneficiary can request a copy of the estate accounts, which will set out all income and expenses.
The amount of any taxes and other debts will therefore reduce the money paid to the residuary beneficiaries, as they are the last in the queue, after any specific cash legacies.
For help with administering an estate, call the probate experts at legalmatters on 01243 216900 or email us at email@example.com.