Funding inheritance tax

The following Wills & Probate practice note provides comprehensive and up to date legal information covering:

  • Funding inheritance tax
  • Sources of funds
  • Assets not requiring a grant
  • IHT direct payment scheme
  • Payment of IHT from qualifying NS&I funds
  • Bank and building society loans
  • Loans from beneficiaries
  • British Government Stock
  • Insurance or pension proceeds
  • Acceptance in lieu
  • More...

Funding inheritance tax

Sources of funds

Practitioners should advise the personal representatives (PRs) to make arrangements for funding inheritance tax (IHT) early so that funds are available as soon as the grant application is ready to be lodged. There are several methods for paying the IHT due on the deceased’s estate, including:

  1. assets not vesting in the PRs, such as insurance or pension proceeds

  2. assets not requiring a grant

  3. from the deceased's bank or building society account by the direct payment scheme (DPS) using Form IHT423 or otherwise by agreement with the relevant institution (on a case-by-case basis)

  4. from the deceased's National Savings & Investments account also by the DPS using Form IHT423 or otherwise

  5. from the deceased's British government stock (although it is not advisable to use this method if the PRs wish to obtain the grant quickly)

  6. bank or building society loans

  7. loans from beneficiaries’ or PRs’ own funds or via loans taken out by them

  8. by transferring an item of national heritage (this method is only available in exceptional circumstances and is dealt with on an individual basis)

Assets not requiring a grant

The executors may be able to sell some assets without the need for a grant and produce cash for payment of IHT. A grant is not needed to pass chattels; this is achieved by delivery coupled with the necessary intention. Under London Stock Exchange rules an

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