In the UK, inheritance tax (IHT) can be a significant financial challenge for executors and the beneficiaries of an estate. Inheritance tax loans offer a solution to this ever widening problem, allowing the executors to settle their tax bill, before the distribution of the estate’s assets.
What Are Inheritance Tax Loans?
Inheritance tax loans are a short-term financial product to help executors pay the inheritance tax due on an estate before probate can be granted. These loans bridge the gap between the tax payment deadline to HMRC and the release of the estate’s assets.
Why Consider an Inheritance Tax Loan?
- HMRC requires inheritance tax to be paid within six months of the deceased’s passing.
- Probate, which grants access to the estate’s assets, is only issued after the inheritance tax is paid.
- Many estates may be asset-rich but cash-poor, making immediate tax payment difficult.
Types of Inheritance Tax Loans
Although any type of loan can be used to pay off your inheritance tax bill, these are some of the most common –
1. Bridging Loans
Bridging loans are a popular choice for inheritance tax payments, offering:
- Fast approval and funding
- Flexible terms, typically up to 12 months
- Options for secured or unsecured borrowing
2. Probate Loans (Executor Loans)
Specifically designed for inheritance tax purposes, probate loans provide:
- No personal liability for the executor
- No income or affordability checks
- Repayment from the estate once probate is granted
3. Legacy Release Beneficiary Loans
These loans allow beneficiaries to access up to 70% of their expected inheritance before the estate is settled.
Considerations Before Taking an Inheritance Tax Loan
- Interest rates and fees
- Repayment terms and conditions
- Alternative options, such as a payment plan offered by HMRC
Conclusion
Inheritance tax loans provide a valuable financial way for executors to face the challenge of settling an inheritance tax bill. By offering a bridge between tax deadlines and asset distribution, these loans can help with the probate process while helping to preserve the value of the estate.
Always consult with a financial advisor.
