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Income tax

Inheritance Tax Legislation Set to Complicate Estate Administration

Strategic Insights

— 1 min read

Delays in obtaining probate are a growing concern for executors and families as the administration of estates becomes increasingly complex. New inheritance tax legislation, set to come into force in 2027, will impose income tax on beneficiaries, causing further complications. The current process of passing on defined contribution pensions tax-free before the age of 75 will be altered, requiring executors to locate and gather information on multiple pension schemes, further entangling the probate process.

Key Takeaways:

  • The new inheritance tax legislation, set to come into force in 2027, will impose income tax on beneficiaries, regardless of the pension holder's age at death.
  • The process of passing on defined contribution pensions tax-free before the age of 75 will be altered, requiring executors to locate and gather information on multiple pension schemes.
  • Obtaining probate is a vital step in gaining control of a person's estate after death, allowing executors to access accounts, pay debts, and distribute inheritance.
  • The Ministry of Justice reports that most probate applications are being granted within eight weeks, with ongoing efforts to reduce waiting times for applicants through staff training.
  • The number of families waiting over a year for a grant of probate has more than doubled over the last three years.
  • HMRC proposes charging interest on unpaid IHT after six months, even if the delays aren't the fault of the executors, with an 8.25% interest rate.
  • Fiona Mainwaring advises executors to seek legal advice at the earliest opportunity, as the system lacks consistency and a backlog of complex cases is causing delays.
  • Fiona recommends having open conversations with executors, keeping a record of all pension schemes, and considering making lifetime gifts to family members to simplify the probate process.

Statistics:

  • 8 weeks: The current average waiting time for most probate applications to be granted.
  • 125%: The increase in the number of families waiting over a year for a grant of probate over the last three years.
  • 8.25%: The proposed interest rate for unpaid IHT after six months.

Sources:

  • "Head of Wills and Probate at ORJ law firm, Fiona Mainwaring"
  • "The Ministry of Justice"
  • "HMRC"

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