When somebody dies their Personal Representatives (the Executors named in their Will or their Administrators if there is no Will) have an obligation to identify and report for inheritance tax purposes any assets belonging to the deceased, and then encash them as necessary or transfer them to pay any amounts due from the estate and then to distribute the remainder to the beneficiaries who are entitled to receive the estate.
Assets will include any property owned by the person who has died, together with any bank and building society accounts, shareholdings and other investments, any physical items they own such as personal belongings or a vehicle, and any amounts due to them such as refunds.
A growing issue relates to online and digital assets. The Office of Tax Simplification is currently consulting on a review of Inheritance Tax and the Institute of Legacy Management (‘ILM’), an umbrella body for UK charities who receive donations from gifts in Wills, have consulted their members and provided a very useful response, based on their members broad experience of estate administration issues: http://legacymanagement.org.uk/wp-content/uploads/IHT-consultaion-ILM-response.pdf
One of the issues they raised was in relation to online assets. The value of all assets, whether digital or physical, should be reported for inheritance tax purposes and then dealt with as part of the estate administration. Their concern is that, either for reasons of ignorance about the existence of such assets, or occasionally dishonesty by the personal representatives (who might stand to benefit by seeking to reduce the amount of inheritance tax payable or by withholding information about such assets from the beneficiaries) such assets could be overlooked resulting in underpayment of inheritance tax, temporary delay in the payment of the value of such assets to the beneficiaries if they are only subsequently identified, or permanent loss if they are never identified.
Examples might include of the estate for inheritance tax purposes online bank accounts, Paypal accounts, cryptocurrency, ownership of internet domains and any other digital assets owned by the deceased during their lifetime.
They felt that executors could unwittingly fail to identify assets could be found by reviewing the deceased’s ‘digital life’. Quite often, a testator might appoint one of their peers to be their executor, and it was felt that there might be a general lack of awareness of the potential for digital assets than if a younger generation has been appointed. The provision of suitably helpful guidance from the HMRC could also assist in avoiding the value of an estate being under-declared through ignorance.
Even though an asset may be digital, there are often ways in which they can be identified. Furthermore, it could be appropriate for the owner of the online assets to provide information about them to the Executors or to store that information with their Will (although it is vital they should not include the information within the Will itself as it will become a public document once a grant of probate has been issued).
Professional advice, both for people making their Wills, and for Executors after death, can assist the Executors in identifying, and ultimately the chosen beneficiaries receiving the benefit of, these assets.
We are pleased to assist you, both in relation to planning your Will, or dealing with probate issues after death. We are on hand to help with any queries you may have in regards to Wills and Probate issues. Our wills and probate solicitors are based in Wakefield, Dewsbury, and Horsforth. Feel free to call us on 0330 300 1103 or request a call back.