My wife is an executor of her uncle's will. He has an estate valued at approximately £500,000.

He is leaving 70 per cent to various charities and the remaining 30 per cent to family.

Firstly, my wife was told that she may be liable for any tax the charities have to pay which I think is incorrect?

Secondly if the value of the estate remains at £500,000 and he gives 70 per cent (£350,000) to charity will the remaining £150,000, because it's below the £325,000 threshold, be liable for any inheritance tax? Could you help please.

Tanya Jefferies, of This is Money, replies: This is a good question because leaving money to charity in your will is a wonderful thing to do, but it can affect how your estate is administered and there are some pitfalls to avoid.

The issues people need to consider are covered in a recent This is Money guide: Leaving money to charity in your will: How to create a legacy and cut your IHT bill.

Regarding your question, we asked a financial expert with many years of experience in helping people plan for inheritance and sort out estates to answer you below.

Ian Dyall, head of estate planning at Evelyn Partners, replies: Let me start with the good news and then I'll provide a little background which may explain where I think the confusion may have come from.

Firstly, provided your wife administers the estate to the best of her abilities and isn't negligent, she should not be personally liable to any tax on the estate's assets and can reclaim the cost of administering the estate from the assets in the estate.

You don't say whether her uncle is alive or is deceased. 

However, based on the current value of the estate and the amount going to charity, there should be no inheritance tax unless there will be (or were) significant gifts by her uncle in the last seven years of his life which use up part of the £325,000 nil rate band.

So why might someone tell your wife that she could be liable for any tax the charities have to pay?

Executors can be personally liable if they get the administration of the estate wrong. For example, a few years ago an executor administered the £1.2million estate of a friend which largely consisted of property.

He paid enough inheritance tax to get a grant of probate leaving £340,000 unpaid (which is possible with property, if you pay off the bill by instalments with interest).

The executor then distributed the remainder to the beneficiary, on the understanding that the beneficiary would pay the remaining inheritance tax as it became due.

The beneficiary promptly moved to Barbados leaving the bill unsettled. The courts found the executor personally liable for the debt.

The moral is, if you are an executor, don't be too hasty in paying out the proceeds to the beneficiaries.

Ensure that you have definitely identified all the possible beneficiaries and that you keep sufficient funds to pay all the debts owed by the estate including the tax.

How does the gift to charity fit into this? I am not fully clear on what your wife has been told, who told her, and how much they know about the value of her uncle's estate. However, the following may be the root of the confusion.

When money in an estate is left partly to a person or organisation exempt from inheritance tax, like a charity, with the remainder going to people who are not exempt (for example children, nephews, nieces), then the question is, how is the burden of inheritance tax shared?

Do you work out the tax on the whole estate and then split the remainder 70:30? In which case, the charity is effectively receiving a reduced amount due to the inheritance tax, even though it is exempt from paying inheritance tax.

Or should the charity get 70 per cent of the gross estate before tax, with nothing deducted as it is exempt from inheritance tax, and the remainder of the estate then pays all the inheritance tax?

A good solicitor will be aware of this issue and be clear in the will about which of the above options should be applied.

However, the default option is usually the second one where the charity suffers none of the tax. This actually leads to a lower overall inheritance tax charge but less going to the non-charity beneficiaries.

You can see that you might (lazily) describe the second option as the executors being liable to any inheritance tax on the charity's share. This may have been what was meant when your wife was told she would be 'liable for any tax the charities have to pay'.

Fortunately, in your case the question appears to be academic.

Provided there are (or were) no significant gifts made by you wife's uncle in the seven years before his death the estate should have a nil rate band of £325,000 (or more if he has a transferrable nil rate band from a late spouse).

The gift to the charity is exempt and the residue should fall within the nil rate band.