Trust tax returns following probate

John_Pierpoint

Savvy_Sue wrote: »

Nothing said [in the will] about maintaining the house or paying CT, and I'm certainly not putting ideas into my mother's head about the slightest possibility that she might no longer be responsible for such things! :rotfl:

When ever my mother used to have a grumble about the expense of living in a four bedroom house, I could have muttered - and who was it who paid off your late husband's irresponsible debts, as well as having to built his own house brick by brick ?

But it I used to just squint at the garage and say "Hmm I recon if that sister of mine could raise the capital, we could convert the garage into a living room and with our two bedrooms we would have a nice little flat, that should bring in a few quid a month".:D

In fairness to mum - she soldiered on with a part time job she loved doing, well into her 70's, so that helped build up a pension in addition to the £750 a year she got by way of half my dad's pension entitlement.

John_Pierpoint

Savvy_Sue wrote: »

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[Legal House Ownership]
Mum and (deceased) Dad. We looked into this, and decided that while we COULD change it, we didn't HAVE to. And it was likely to make Mum twitchy, even though no-one has any intention of making her move out.

A lot of widows feel more comfortable with a phantom husband on the "deeds" and in the 'phone book. This does not seem to cause problems with claiming the 25% single ownership reduction for Council Tax.

There is not much chance of phantom husband selling the house or (worse) raising a mortgage on it.

My mother and I were on the Land Registry certificate for dad's house, with teenage daughter/sister having to trust us .

Savvy_Sue

John_Pierpoint wrote: »

A lot of widows feel more comfortable with a phantom husband on the "deeds" and in the 'phone book. This does not seem to cause problems with claiming the 25% single ownership reduction for Council Tax.

There is not much chance of phantom husband selling the house or (worse) raising a mortgage on it.

My mother and I were on the Land Registry certificate for dad's house, with teenage daughter/sister having to trust us .

More to the point, it would cost money to change the ownership to reflect Dad's death. And Dad's death shouldn't, as we understand it, make it any more or less difficult to sell when the time comes - probably when the owners will be listed as both being deceased. And while there is no danger of our deceased father either selling or raising a mortgage on the house, there is also no possibility of our living mother doing so either, at least not without consulting us!

BTW if I go quiet, please don't think me rude. But I must pack!

Mikeyorks

Savvy_Sue wrote: »

And Dad's death shouldn't, as we understand it, make it any more or less difficult to sell when the time comes -

It doesn't. I shepherded the family home into Trust 4 years ago acting as Executor for my mother. It didn't help that - up to 2 days prior my Father's death I was working to a very simple mirror image Will she'd given me. Bit of a surprise to be tidying up some papers ...... and find later Wills she appeared to be oblivious of!

Which put 50% into Trust with her + 2 partners from the Solicitors as the Trustees. Didn't take long to work out that left the Solicitors wholly in charge on the 2nd death.

So I got them to renounce their interest on the 1st Probate and to then change my Mother's Will to a very simple one, a few months later. As it slightly appalled her that we would need the Solicitor's agreement to funeral costs etc when she went. She swore blind - bless - she'd never signed anything. Until I pointed out her signature on the Will .... and on the copy of the very informative note the Solicitor had issued to them both - and spelling out what they had signed up to.

So that left me to do all the tidying up on the 2nd death - 2 years later. And the Trust simply collapsed at that point as she'd been sole Trustee.

Other than the appalling market conditions - however - and the slightly mind numbing job of clearing out the family home ....... no legal issues whatsoever with the sale process.

Savvy_Sue

Feel as if I'm going round in circles here ...

Further conversations with the accountant have left me thinking we don't need to do tax returns (as suggested here) for the trust, but my co-executor thinks my conversations indicate that we do ...

Anyway, one of the things that is causing confusion is that one of Dad's assets was just over £40,000 in share ISAs. I've been thinking that there were no shares, because to me they behaved just like a bank account: tell the institution Dad's died, the institution sends money and statements.

I've re-looked at the guidance for IHT 205, and we put these in the right place on the form, but I just need to check (because I am a stocks and shares virgin) whether we did right to just put the value as the money we were sent when we cashed them in on Dad's death? There is of course guidance in the notes about how to value shares, but presumably we know what they were worth at the date of Dad's death because that's what we got for them. Or am I over-simplifying here?

Now, the money we got for those ISAs was split 5 ways, so I can't see that any of us individually would be due to pay CGT on them, but is the estate / trust potentially liable, depending on what the stock market did between dad investing in his various ISAs and dad dying?

And how the blankety blank do I go about finding THAT out? should I need to ... Is it a case of trawling back through Dad's paperwork, and working out when and how much he paid in over the years? Then subtracting that from the final total, doubtless splitting it by years ...

Again, just trying to get my head round this before I go back to accountant / co-executor ...

getmore4less

Savvy_Sue wrote: »

Feel as if I'm going round in circles here ...

Further conversations with the accountant have left me thinking we don't need to do tax returns (as suggested here) for the trust, but my co-executor thinks my conversations indicate that we do ...

Anyway, one of the things that is causing confusion is that one of Dad's assets was just over £40,000 in share ISAs. I've been thinking that there were no shares, because to me they behaved just like a bank account: tell the institution Dad's died, the institution sends money and statements.

I've re-looked at the guidance for IHT 205, and we put these in the right place on the form, but I just need to check (because I am a stocks and shares virgin) whether we did right to just put the value as the money we were sent when we cashed them in on Dad's death? There is of course guidance in the notes about how to value shares, but presumably we know what they were worth at the date of Dad's death because that's what we got for them. Or am I over-simplifying here?

Now, the money we got for those ISAs was split 5 ways, so I can't see that any of us individually would be due to pay CGT on them, but is the estate / trust potentially liable, depending on what the stock market did between dad investing in his various ISAs and dad dying?

And how the blankety blank do I go about finding THAT out? should I need to ... Is it a case of trawling back through Dad's paperwork, and working out when and how much he paid in over the years? Then subtracting that from the final total, doubtless splitting it by years ...

Again, just trying to get my head round this before I go back to accountant / co-executor ...

CGT and IHT are mutualy exclusive so all CGT liabilities die with you.

Also these were ISA so no tax liabilities at all upto DOD.

The issue you have is you need to establsh any tax liabilities for the period of administation, so capital/income while the assets were held as part of the estate before puting into the trust or distributed

For share holdings
Value the Shares at DOD. this includes any dividends due but not paid.

When you cashed this lot then you have the new value.

Any difference is a loss/gain for the estate.
any dividends become income for the estate.

What I did was write to HMRC with a list of all the estate income and tax paid and they sorted it out for me across 2 tax years.
Some of the ISA income was still untaxed for aa while.


Note that some shares may not do dividends but might be interest bearing.

If you want I can have a go at valuing the shares, I am going to have to do some myself for another estate.
(can PM this list if you don't want it public)


It is unlikely there is any gain/loss above the allowance and the value used for probate is probably a bit out if you used the value as cashed in butthat won't matter unless there is an IHT issue(you said well below £325k so should be OK)

Savvy_Sue

getmore4less wrote: »

The issue you have is you need to establsh any tax liabilities for the period of administation, so capital/income while the assets were held as part of the estate before puting into the trust or distributed

Yes, I think I get that bit, except that we distributed fairly quickly so that I don't see that there's a liability.

getmore4less wrote: »

For share holdings
Value the Shares at DOD. this includes any dividends due but not paid.

When you cashed this lot then you have the new value.

Any difference is a loss/gain for the estate.
any dividends become income for the estate.

That's where I start to get stuck: EVERYTHING was either in ISAs or bank accounts, so I don't see how I get to make the first valuation, because Dad wasn't holding shares as shares, he had ISAs. I thought the whole point of ISAs was that you didn't have to actually do any buying or selling of shares yourself: you just left it all to the provider to do their best at making you some money.

getmore4less wrote: »

What I did was write to HMRC with a list of all the estate income and tax paid and they sorted it out for me across 2 tax years.
Some of the ISA income was still untaxed for aa while.

Which bit of HMRC did you write to? My co-executor thinks that would be the way to go.

getmore4less wrote: »

If you want I can have a go at valuing the shares, I am going to have to do some myself for another estate.
(can PM this list if you don't want it public)

Thanks, that's very kind but do we have to do this if all the shares were in ISAs?

What fun it's going to be when we have to do Mum's will ...

getmore4less

ISA is just a tax wrapper that stop existing at DOD.

Cash ISA are easy the interest just starts getting taxed.

For a S&S ISA you need to find out what was actualy held in the tax wrapper so you can establish value and if they generated any income.



I don't have the paperwork to hand but I think I sent the estate income stuff to the same tax office that the normal income tax stuff went to.

Even though you cashed and distributed quickly there was still likely to have been some income even if allready taxed, getting the tax office to say OK there is no liability might be worth while.
Capital gains are very unlikely.

jimmo

Sue, I hope this doesn’t add to your confusion but what is puzzling me is that your dad died in December 09 and, as far as I can make out, you seem to have distributed the value of his stocks and shares ISA in June or July 2011.
Is that right or can you clarify?
I am no great shakes on IHT but as I understand it, the value of dad’s stocks and shares ISA to be included in his estate is the value at the date of death.
There’s a get out clause when an asset is disposed of shortly after the death and realises less but we don’t need to go there because you say no IHT is due.
Capital Gains Tax is a completely animal however and whilst I can’t really follow what you have said about trusts, the Capital Gains Tax reality is that on the date of his death, the beneficial ownership of the contents of your dad’s stocks and shares ISA passed to another “person or persons”.
That “person or persons” will be either the single body that is the executors or it will be the beneficiaries.
Whoever that “person or persons” is has a chargeable occasion for Capital Gains Tax when the contents of your dad’s S&S ISA were disposed of, i.e. when the ISA provider paid out and the Capital Gain, if any, will be the difference between the value at the date of death and the amount actually paid out. Its not as simple as that but its good enough for now.
Now, one way or another, whoever is potentially liable to Capital Gains Tax will be entitled to a Capital Gains Tax annual exemption, currently £10,600.
http://www.hmrc.gov.uk/rates/cgt.htm#1
As the S&S ISA paid out in the region of £40,000 I find it very hard to even imagine that the “person” who made the disposal has realised a Capital Gain (between Dec09 and Jul 11) in excess of £10,600 and would therefore be very confident that no Capital Gains Tax is payable.
Income Tax shouldn’t be a problem because you confirmed in post #10 that the providers deducted tax following dad’s death.
You need to consider whether that is good enough for you and your co executor.
To my mind, your accountant is offering to dot all the Is and cross all the Ts at a price but it is about 99.95% certain that you do not need the service offered.
On the other hand your co-executor seems to be inclined to pay up for peace of mind.
You seem to be somewhere in the middle but at the same time you don’t even know whether the trust your dad’s will created includes all assets or is solely related to the house.
Where do you want to take this?
I think that if you decline your accountant’s kind offer you are unlikely to have trouble from the taxman but you will be relying on anonymous posters on a forum but there are all sorts of things you don’t understand particularly about trusts.

Savvy_Sue

Thanks jimmo, I think you're right on many counts ...

1. the money from Dad's ISAs and the contents of his sole bank accounts were shared equally between his children in 2 or 3 instalments between gaining probate and July 2011. We have kept some back to cover the kind of contingency that's rumbling away here.

2. None of us have ever been on the wrong side of CGT ... and 1/5 of the 'gain' from £40,000+ of ISAs doesn't take us there or anywhere near there. Actually, to be truthful, I don't think I've ASKED everyone if they've ever been on the wrong side of CGT, but I know enough of their lifestyles to be pretty confident ...

3. I think the accountant is offering to dot all the Is and cross all the Ts, and your assessment of where I and my co-executor stand on this issue is about right. There is a slight communication issue, in that we had one face to face meeting, since when I have emailed any questions to the accountant (so that I have a record of what's been said) but he doesn't always reply. That means I have to phone him and take notes of what he's said, which I then pass on by email to my co-executor, who then raises a supplementary, which I forward to the accountant, and so it goes on. My co-executor finds phone calls difficult, so I think if we're going to take this further we ought to arrange another face to face. You've probably guessed that this we don't live that near each other, fortunately not TOO distant but enough to need a bit of planning.

4. Trusts: there are some days when I think I understand the trust situation, and others when I don't ... At this time of night, I'm not even going to try ...