Inheritance tax – where does the money come from to pay it?

A recent case with HMRC highlights the need for individuals to firstly consider if their estate will be liable to inheritance tax and secondly, if it is, where the money is going to come from to pay it.

Many people when making their Wills, know whether their estate will be liable to IHT, but do not necessarily consider where how the tax bill will be paid. This can be simple if someone has a large sum of money in a bank account that is easily accessible, but what if there is no cash available?

The Howard family of Castle Howard in Yorkshire have highlighted how using the government’s Acceptance in Lieu scheme can avoid the hassle of trying to source a large sum of money to pay the tax bill. The family donated a Joshua Reynolds portrait to the Tate Britain gallery to settle a GBP4.7 million inheritance tax bill under the scheme which allows taxpayers to pay IHT by transferring important works of art and heritage objects into public ownership. If the item is accepted by HMRC, the taxpayer is given the full open market value of the item and the object is then allocated to a public museum, archive or library.

Whilst the scheme is not often utilised or indeed applicable to many estates, it highlights the need for testators to think about the potential tax liability of their estate when drafting their Wills and how easy it will be for the executors to pay any tax bill on their death.

Should you require any further information, please contact Jennifer Wilkinson in our Wills, Probate, Tax and Trusts Department on freephone 0800 975 2643 or send any question via our online contact form.

Jennifer Wilkinson

About Jennifer Wilkinson

Jennifer Wilkinson is an Associate Solicitor within the Wills, Probate, Trusts and Tax Department at Forbes Solicitors. Jennifer’s blogs cover her specialisms of Will writing, dealing with the administration of estates, paying for care, powers of attorney and court of protection issues. Jennifer is also a member of Solicitors for the Elderly and specialises in matters specifically relating to elderly clients.
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