Financial Times Guide to Inheritance Tax, Probate and Estate Planning

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Obtaining details of assets and liabilities 47

the foreign property is situated may be such that some tax must be paid

abroad. If this is the case, the personal representatives may have to deal

with the payment of the foreign tax and then deal with claiming some

credit for this if there is a UK inheritance tax liability. If the property needs

to be valued or sold, then expenses may need to be incurred and these may

be deductible from the estate, as a liability.

Types of liabilities in the estate

Liabilities and debts of the estate are anything the deceased person owed

at the time they died. Sometimes liabilities also need a valuation for the

correct amount to be obtained. The personal representatives should nd

details of the liabilities when sorting through the deceased’s paperwork,

but they may also need to contact relevant organisations such as utility

companies to ascertain the amount owed to the date of death.

Mortgages

The personal representatives should review any mortgage statements to

ascertain the relevant information needed. Types of mortgage include:

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Endowment mortgages, where only the interest on the loan is paid to

the mortgage provider each year. In addition to having the mortgage,

it is likely that an endowment policy, which is a form of life insurance

and investment policy, was taken out to pay off the mortgage at the

end of the term. If this is the case, then the value paid out by the

endowment policy will be included in the estate.

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Capital repayment mortgages are those where some of the capital of

the mortgage (some of the outstanding balance) is paid in addition to

the accrued interest each year. In this case, the outstanding balance

will not automatically be paid off on death. The outstanding balance

can be deducted from the estate as this will need to be paid back to

the mortgage provider. Sometimes the mortgagee (person taking out

the loan) takes out an insurance policy to provide funds to pay off the

mortgage. For instance, to avoid the sale of a property if this is still

required to provide for family etc. If a life insurance policy was taken

out, this should be included in the estate.

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Joint mortgages: Many couples own a property jointly and have a

mortgage in both of their names. If this is the case, only deduct the

deceased person’s share of the mortgage.