No longer confined to filing cabinets, safe deposit boxes and traditional documentation, the wealth of an estate today is increasingly held in digital form, within online accounts protected by passwords and private keys.
As digital assets such as cryptocurrency become more commonplace in estates, executors face new challenges in identifying, valuing and accessing these sources of wealth. While these assets can contribute to the value of an estate, they do not always provide immediate liquidity. In estate administration, this liquidity gap means that assets may be valued for inheritance tax purposes but cannot always be accessed or converted into cash when needed.
The structure of inheritance tax obligations, as prescribed by HM Revenue and Customs (HMRC), compounds this challenge, as inheritance tax is generally payable on the taxable portion of an estate before probate is granted. Now forming part of the estate alongside property, private business interests and investment portfolios, digital assets may be highly volatile, difficult to access, or subject to delays in realisation.
Because inheritance tax is calculated based on the value at the date of death, and regardless of whether those assets can be readily converted into cash, executors may be required to settle a tax liability at a point where the estate is asset rich but cash-poor. The resulting liquidity gap prevents assets from being quickly realised to meet immediate tax obligations.
In these situations, solutions such as InheritNOW, provided by The Estate Registry, can offer executors a practical source of liquidity through Inheritance Tax (IHT) Loans and Estate Expense Loans. IHT Loans enable tax liabilities owed to HMRC to be settled while giving executors time to access or realise digital assets. Estate Expense Loans, launching soon, will provide flexible access to funds to support essential estate administration costs.
These solutions can be accessed without requiring executors to assume personal liability or ongoing debt obligations since repayment is made directly from the estate once probate is granted and funds are released.
As estates become more digitally complex, a parallel consideration is to ensure that assets are documented and accessible when needed. Digital vaults, including The Estate Registry’s emerging LegacyNOW solution, are designed to support this need by enabling individuals to securely store and organise important documents and digital assets while providing executors with clearer, more accessible estate information.
The gap between inheritance tax valuation and available liquidity is becoming increasingly clear as digital assets become more prevalent within estates. Practical solutions, such as those offered by The Estate Registry, can help bridge this divide, supporting the timely settlement of inheritance tax without placing personal financial burdens on executors.
James Emery (pictured)
This article was submitted by The Estate Registry as part of an advertising agreement with Today’s Wills and Probate. The views expressed in this article are those of the submitter and not those of Today’s Wills and Probate.
