From Monday, 31 March, banks can be asked to pay inheritance tax direct to the Inland Revenue from bank accounts of deceased customers without production of the Grant of Representation by the executors (Probate) or administrators of the estate (Letters of Administration). This is as a result of a new initiative following discussion between banks, building societies and the Government and has been announced by the British Bankers Association.
Conceivably, banks who release funds without the appropriate Grant of Representation may be accused of intermeddling in the deceased's estate. The bank has no means of knowing whether the estate is in fact insolvent and may receive unexpected but valid claims from third parties upon funds which have passed out of the account at the discretion of the bank and without proper legal authority.
Participation in the new scheme is voluntary. Until now, personal representatives have obtained funds by means of a bank loan to pay the inheritance tax and thereby obtain Grant of Representation before funds from the deceased’s accounts would be released. There is no legal hindrance to banks continuing to follow this procedure. There may of course be competitive issues for individual banks if they are not seen to be participating in the scheme. Banks would however be well advised to consider the credit implications of agreeing voluntarily to release funds from the account without legal authority and to consider whether any form of indemnity would be extensive and sound enough to provide the necessary degree of protection to the bank.
For further information, please contact Ruth Pedley at ruth.pedley@cms-cmck.com or on +44 (0)20 7367 2098
