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Royle Family’s Caroline Aherne Accidentally Left Her Mum with a £71,000 Inheritance Tax Bill

Inheritance Tax stress for Caroline Aherne's bereaved Mum

Recently published probate records of the estate of the late comedy legend Caroline Aherne show that her bereaved mother had to deal with a tax bill of £71,000 because of her tragic loss.

The nation mourned when Miss Aherne died at the age of just 52. As a single woman with no children, who did not make a will, her estate was inherited by her next of kin, her mother, to whom she was very close.

How the tax liability arose

Miss Aherne’s estate was valued for probate purposes at just over £500,000.

As she was single, there was a Nil Rate Band allowance for Inheritance tax, worth £325,000, which meant that the first £325,000 could be inherited by her mum tax-free.

But there was a whopping 40% tax liability on the rest of her estate, which is a form of double-taxation in her case, because her wealth was accumulated entirely from her earnings, on which she would have paid a considerable amount of income tax throughout her successful career.

HMRC is no respecter of bereavement.

To rub salt in the wound, the tax was payable upfront, within six months of Miss Aherne’s death. As her next of kin, Miss Aherne’s mother would have been burdened with the responsibility for administering her estate. Consequently, it immediately fell to her mother to raise the cash to satisfy HMRC at a time of rawest grief.

As Miss Aherne’s business had cash reserves of £76,000 at the time of her death, her mother might have been able to use that cash to satisfy the tax demand. But this wouldn’t have been possible if the bank’s policy was to insist on a Grant of Letters of Administration before they could release cash.

Many banks have “small balance” exemption, which lets them immediately release a deceased customer’s funds to their family if the balance is below a certain level. But a £76,000 balance may not have fallen within the bank’s small balances exemption.

Unfortunately, a Grant of Letters of Administration, the Probate document her mother would need to access major assets, can’t issued unless and until Inheritance Tax is paid. So, unless Miss Aherne’s bank was willing to help, her mother may have had the extra worry of having to take out a short-term loan to cover Inheritance Tax bill.

Could this have been avoided?

The short answer is: yes. With intelligent estate planning advice, Caroline Aherne could have saved her mother a great deal of unnecessary extra stress on top of her bereavement.

For example: -

  • In her will, she could have chosen an additional executor with money and business skills, such as her accountant, to act as business executor and help her mother.
  • For a relatively modest monthly premium – typically £30-£40 a month for a woman of her age group – she could have taken out a life insurance policy, set up to pay £71,000 directly to the executors of her will on her death. This would have given her mother instant access to the funds needed to pay the Inheritance Tax and start the Probate process.

Why didn't she do this?

Miss Aherne may well have felt that making an estate plan wasn’t a priority. After all, she was a young, single woman who didn't have a spouse or children to worry about.

But her untimely death, and its consequences, show that we never know what’s around the corner, and that the consequences of not acting can be very tough on those we love.

The lessons to take from Caroline Aherne’s story are two important “don’ts”

Don’t put off making your estate plan until you’re “properly old”. If you’re a grown-up with assets and people you care about, it’s important to take responsibility for your affairs.

Don't assume that making an estate plan isn’t necessary just because you’re single. In many ways, it’s more important than ever. For more guidance on this take a peek at our Estate Planning Tips for Happy Singletons.

To find out more about making an estate plan, just give us a call on 0151 601 5399 or fill in the contact form below.

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