Inheritance Tax (IHT) is due by the end of the sixth month after someone dies. Allowing for time to grieve and thereafter the thankless task of collecting essential information from banks, valuations and details of debts, this deadline can creep up on you.
Although of course the tax is payable from the assets of the person that has died, the Executor is the person responsible for working out how it is paid. In many instances the Executor will not be able to access funds of the deceased until they hold a grant of probate, and this cannot be obtained, until the inheritance tax is paid! A chicken and egg situation.
Thankfully there is a helpful solution known as the DPS, the Direct Payment Scheme. This supports Executors by arranging payments direct from the bank or other financial holder of funds in the name of the deceased in return for an undertaking by the Executor. This avoids arranging finance; bridging or other form of bank loan or cashing in a policy unnecessarily for example..
A point to note is that obviously third-party policies, processes and timescales can vary so it is important to:
a. Check with the financial institution that they will accept a DPS request
b. If so, whether they have any additional requirements (i.e. on top of HMRC's DPS form)
c. Methods by which they accept the request (not too long ago some asset-holders still insisted on faxed requests!)
d. Check their timescales for payment, to avoid missing the IHT deadline and interest therefore arising.
Ultimately, we would recommend obtaining professional support to navigate this process. Giles Wilson are on hand to assist the Executor through this process, so alleviating some of the burden of this important role.
