Solicitors are not the enemy: appointing professional executors

Recent press coverage has been focusing on the appointment of solicitors as professional executors. Unsurprisingly the negative aspects that a few people have experienced from a handful of firms are being highlighted, specifically the high costs and lack of communication with the beneficiaries. However in every profession there will be individuals that do not provide the level of service that most of us strive to give. Therefore when considering the appointment of professional executors it is important to consider the benefits this can bring, including tax savings that often justify, and can outweigh, the costs incurred.

When taking our clients' Will instructions the clients are made aware of the cost implications of appointing professional executors. A cost estimate, based on current charging structures, can also be provided on request. The option of using professional executors would commonly be raised at the client's request or if the complexity of the Will merits that level of involvement. Having an independent solicitor as an executor often smooths tensions between beneficiaries as they have the assurance that the estate is being administered appropriately and their interests protected, with no favouritism shown to a specific individual.

It is important to remember that, as the name suggests, professional executors do have the expertise to provide assistance and guidance with all aspects of estate administration which lay executors may not be aware are even available, particularly in relation to taxable estate.

There are many exemptions and reliefs available to reduce or possibly remove an inheritance tax (IHT) liability. These often rely on detailed technical knowledge to be identified and successfully claimed, such as agricultural property relief and business property relief. A significant part of a professional executors' role in estate administration is to identify these areas and compile the necessary information for a successful application.

As solicitors we work closely with other professionals such as land agents and accountants and regularly instruct them to assist with estate administration to support and strengthen claims for the identified tax reliefs. All professionals have their own expertise within their specialisms so, for example, we benefit from knowing which valuer has a particular strength with niche business valuations and so on.  We also have the ability to provide clear instructions to ensure that reports include all information required by the HMRC for a successful claim. This knowledge may not to be apparent to lay executors.

There are other methods that can be used to reduce a tax liability. For example we were approached by a widower whose wife had died without leaving a Will (Intestate) thereby triggering a substantial tax charge as a proportion of her estate passed automatically to her children (all minors). The tax liability was just over £250,000. We were able to advise and implement a strategy that saw the children's share re-directed (by Variation) to their Father for a fixed period of 3 years and then back to the children. This meant the spouse exemption from IHT became available.  Court approval to this arrangement was secured as the children were all minors. Without professional input the beneficiaries would have been unaware this option even existed and, due to the strict timescales that apply to a variation of this nature, would have likely missed out on this valuable tax planning opportunity.

Solicitors are governed by a strict code of conduct that is set out by the Solicitors Regulatory Authority. This includes the requirement to advise clients at the outset of the likely fees to be incurred on their file. Although the executors of an estate are our clients, where partners of the firm are appointed as executors we will also provide the residuary beneficiaries with details of our cost estimate, the work we will be undertaking and the likely timescales of the work involved at the outset, as if they were our clients.

We want to ensure that lay executors and beneficiaries are happy with the work we undertake on their behalf. We, therefore, appreciate the importance of being transparent with our charges from the outset and ensuring residuary beneficiaries are provided with the necessary information.

Unlike recent articles have highlighted, we do not charge a value percentage element for our estate administration work, whether we are appointed as executors or instructed direct by lay executors. Our work is usually charged on an hourly rate basis with the work delegated to the appropriate level of lawyer depending on the complexity of the task to ensure the costs are kept at a reasonable level. Fixed fee costs are also available on request.

In many straightforward cases the use of professional executors will not be essential. However when the circumstances are appropriate professional executors can provide experience, expertise and connections that can greatly benefit the estate and, accordingly, the beneficiaries' interest.

If you would like to discuss the issues raised in this article, including reviewing your own Will to establish whether the appointment of professional executors would be of benefit to your estate and beneficiaries, please contact us.