Beneficiaries Beware

A recent case (Hutchings v HMRC) involving the beneficiary of an estate has highlighted the importance of beneficiaries being open with Executors about gifts. In this particular case the beneficiary, Clayton Hutchings, failed to disclose to the Executors of his Father’s estate that his Father had gifted him around £450,000 from his Swiss bank account to Mr Hutchings’ Swiss account in April 2009. The Executors reportedly asked Mr Hutchings and the other beneficiaries on two separate occasions whether they knew of any gifts made by their father prior to his death and as no disclosures were made the Executors submitted the estate paperwork to the Revenue on that basis.

When the existence of the Swiss transfer came to light two years later, Clayton Hutchings disclosed the details about the gift and the swiss account. That disclosure led to the Revenue claiming additional Inheritance Tax from Clayton Hutchings of £47,000 (personally not from the Estate) and charging him a penalty of £87,533 for deliberately failing to disclose the information about the gift.  Mr Hutchings’ appeal of that decision was rejected. The Executors avoided any personal penalty from the Revenue as they were able to show that they had done their best to investigate the issue of gifts.

This case highlights the importance of Executors making proper enquiries about lifetime gifts and documenting those enquiries to show what steps they have taken. For beneficiaries this case reinforces how important it is that they give full and honest disclosure to Executors of an estate, particularly when they have received lifetime gifts. If they fail to do so then they are very likely to be penalised by the Revenue.

Kitsons Solicitors - Charlie Siegle

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    About the author

    Kitsons Solicitors - Charlie Siegle

    Charlie SieglePartner and Head of Probate and Estate Planning

    Charlie is a Partner and Head of our Private Client team in Exeter

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