Two personal representatives and annual CGT allowance

DCF_Evaluator

Hi

Estate Administration is clear that for the first 3 tax years of the administration the estate/the personal representative has an annual CGT allowance, £11,100 for 2015/6.

But what if the estate has two personal representatives? Does each have an allowance of £11,100 thus making an allowance of £22,200 available against any chargeable disposals by the estate?

Also is this allowance reduced/increased by chargeable gains/losses applicable to one of the PRs in respect of non-estate assets?

G_M

The estate is a legal entity, subject to various taxes.

the Executers/personal representatives are the people responsible for managing it. But it is the estate that is taxed, so it only gets one allowance - otherwise by now solicitors would have got wise to this and would recommend to all their clients that they appoint 15 Executers in their wills.............

The Executers' personal tax affairs have no impact on the tax affairs of the Estate.

DCF_Evaluator

G_M

Many thanks! I was idly wondering whether advisors would have been suggesting multiple PR's ...

DCF_Evaluator

by the same token ...

Probate Value of house £300,000, now valued at £350,000.

If the house is then sold by the personal representatives to a third party for £350,000 there is a potential gain for CGT purposes, for which the estate is liable, of £50,000, all fine.

But what if the house is 'sold' to one of the PR's both of whom are also equal beneficiaries of the estate ... although the house is not a legacy. This means that the second PR 'sells out' his/her remaining interest in the (residue?) of the estate for £175,000 in cash paid by the first PR, the house being the only remaining asset. What is the gain now? Still £50,000? Or 50% of this, £25,000? And does this gain remain a potential liability of the estate?

booksurr

DCF_Evaluator wrote: »

by the same token ...

Probate Value of house £300,000, now valued at £350,000.

If the house is then sold by the personal representatives to a third party for £350,000 there is a potential gain for CGT purposes, for which the estate is liable, of £50,000, all fine.

if the will requires that the house be sold and the money realised is then distributed to the beneficiaries then yes that would be true

if the will is silent on the disposal of the house then any decent solicitor would never allow you to do that as the estate should be distributed before sale so it is the beneficiaries who sell not the estate (or to be technical, also sold as a bare trustee)

DCF_Evaluator wrote: »

But what if the house is 'sold' to one of the PR's both of whom are also equal beneficiaries of the estate ... although the house is not a legacy. This means that the second PR 'sells out' his/her remaining interest in the (residue?) of the estate for £175,000 in cash paid by the first PR, the house being the only remaining asset. What is the gain now? Still £50,000? Or 50% of this, £25,000? And does this gain remain a potential liability of the estate?

if the house is not a legacy then how can it be sold by a PR as by definition it is not part of an estate?

I think you need to go back to basics and understand the difference between an estate, a beneficiary and an owner.

You will then also need to understand how to use a bare trust in respect of an estate, in other words, go see a professional.

DCF_Evaluator

Booksurr

Advice noted!

To others out there, the figures above are fictitional but the circumstances are those of a real 'extended family' estate. The situation with a house to sell and multiple executors who are also beneficiaries I thought would have been extremely common. Yet here we are struggling.

There is a welter of DIY conveyancing, DIY probate etc information/encouragement out there. The DIY probate was straightforward but as we go along complications such as the above are growing rapidly. Just realised that I should really be preparing accounts for the estate as well.

There is a need for great care re tax liabilities, expiry of CGT allowances etc. I wonder how many DIY-ers ever pick these up and if HMRC reviews spot they haven't.

The legal profession could do well in its marketing to highlight such issues; at the moment probate/administration is portrayed as a routine form-filling exercise only.

booksurr

DCF_Evaluator wrote: »

The situation with a house to sell and multiple executors who are also beneficiaries I thought would have been extremely common. Yet here we are struggling.

It is. With respect it appears that it is your failure to understand there is only one estate that is confusing you. The role of executor is simply to follow the instructions of the will paying due regard to the legal responsibilities of their role as executor to act in the best interest of the estate as a whole. Clearly therefore giving rise to tension if there are multiple executors who are also beneficiaries. If disagreement arises then a given beneficiary could end up suing themselves wearing their executor hat if said beneficiary hat considered the executors (ie incl their own executor hat :undecided) were not acting in the interest of the estate or following instructions

Where there is no will there is no executor since there are no instructions to execute. Instead there is one or more personal representatives who must follow the intestacy rules

DCF_Evaluator wrote: »

Just realised that I should really be preparing accounts for the estate as well.

perhaps upfront research would have led to recognising that sooner?
https://www.gov.uk/wills-probate-inheritance/once-the-grants-been-issued

DCF_Evaluator wrote: »

There is a need for great care re tax liabilities, expiry of CGT allowances etc. I wonder how many DIY-ers ever pick these up and if HMRC reviews spot they haven't.

The legal profession could do well in its marketing to highlight such issues; at the moment probate/administration is portrayed as a routine form-filling exercise only.

DIY probate can be simple and I did my father's estate myself, including settling the IHT payable with HMRC, but you do need a somewhat good attention to detail and to understand who is wearing what hat when dealing with each organisation and therefore if your transaction is still within the trust or is now simply a distribution situation

not really sure what you are trying to achieve with this thread? There is as you say lots of info out there which would enable a DIYer to get started, but as ever if there is anything more than a simple estate to deal with then whether acting as executor or personal representative it is that person who carries the legal liability if they get it wrong

the greatest risk of HMRC picking things up is in respect of a property sale since they are notified of every sale taking place in the UK. How they match seller to existing owner and therfore spot second home/estate sales is part of their mystique - try your luck if you are that way inclined but appreciate if caught it will cost you a lot more than a solicitor would have to start with - even allowing for the fact their fees are usually levied as an ob scene % of the estate

G_M

You'll get more relevant help from the Probate forum here.....

booksurr

G_M wrote: »

You'll get more relevant help from the Probate forum here.....

at least I know how to spell executor

xoAmyox

booksurr wrote: »

at least I know how to spell executor

Rude much?

http://dictionary.reference.com/browse/execute?s=t

The two are equally valid.

DCF_Evaluator

booksurr

not really sure what you are trying to achieve with this thread?

good point ... I need to ramble less. What I meant to say was ...

1. I find this forum very useful and would like to pass any useful experience back

2. with this in mind advice to any Solicitors reading this forum:

(a) your marketing material could be made more effective if it pointed out the sort of specific, quantifiable problems I have run into on a DIY basis, especially CGT liability, even with a so-called 'simple' estate

(b) advice to clients; I have had a solicitor working for me on the house conveyance for past 6 months (reasons for delays don't matter here) but not once has the firm pointed out the obvious and growing CGT issue and the need for advice/action in that area; perhaps ethics mean that a firm can't advise in an area unless specifically asked so to do?

3. For any determined future DIY-ers:

(a) we received advice from a non-profit making body 'care home select' I think to dispose of the property during lifetime ... excellent advice although this can of course be an emotive action!

(b) I for one have never really understood trusts but a bare trust is worth investigating if the property is likely to remain in the estate

(c) remember that family wrangles which delay distribution of the estate in years when house prices are rising (ie most years) are just storing a CGT issue up for you!

Good luck all! DCF