Probate on estate that involves a business, land and property - can anyone advise please?

Jet

I instructed a solicitor to deal with probate.  I am sole executor.

After nearly a year, probate still hasn't been applied for. They seem very confused about the business side of things.
My relative died fairly suddenly with a business that he ran as a sole trader.  I have carried on running that business but will be closing it in a month or so. 

The solicitor wants to include all money from the business account as part of the estate - is this correct?  The only personal items paid into the business bank account was a small pension and some rental income, the rest was business.

Should I have any money to pay out for dilapidations on cessation of the business, which "could" run into a 6 figure sum - I have to put in a later claim for relief rather than making an allowance  - is this correct?

There are a number of receipts into my relatives business bank account after his death.  The accountant has added these amounts to the bank balance at the time of death as the receipts relate to transactions that happened before his death.  The solicitor is confused by this, which is standard accrual accounting and has asked me several times why the bank balance on the business accounts is different to the actual bank balance on the bank statement.  I think they don't know how to deal with this in the probate application.  What would be the correct way?

Thanks!

getmore4less

For a sole trader the "business" forms part of the estate.


There will standard practice for dealing with this.
The business ceases to exist on death. 
So any assets and debt form part of the estate  at DOD. 

If you took it over then you need to research what that means for you. 

Did the business have employees?



Loads of info on the web to get you started, Google is your friend to help
https://www.tsplegal.com/solicitor-articles/business-succession-death-sole-trader/

If sole beneficiary it will be easier as no distribution to work out. 

Jet

Thanks for the reply.

No employees.

The business is based in agriculture so certain things are exempt from IHT.

I am running the business as executor and on grant of probate, it will become mine, although it is unlikely that this will happen as probate is likely to be granted once the business has been closed.

There about 13 beneficiaries - I am the residual beneficiary.

Jeremy535897

You don't add post death receipts to and deduct post death payments from the bank balance at the date of death. They are described separately as debtors and creditors of the estate. That is accruals accounting. The solicitor has to record the bank balance at death for probate.

If there was a substantial amount of cash in a business bank account, it might not be covered by the business property relief rules (excepted assets rules). It is not helpful that non-business receipts were paid into it.

Presumably the dilapidations arise out of obligations on the termination of an agricultural lease? They should be deducted from the value for IHT, and if you pay them you have a claim against the estate.

Jet

Thanks for the clarification on the bank balance. Should the accountant be changing the business accounts or the solicitor inputting the bank balance from the statement and then creating the debtors and creditors of the estate? There seems to be some confusion who is “right”. 

What is classed as “substantial” amounts in the bank?  Am I correct in thinking the solicitor will deduct an amount for personal funds? 

I do not know what dilipidations I will have to pay (if any) yet as the landlord is not letting me know and the tenancy is unclear as there is no schedule of condition. The solicitor is saying we should make no allowance or estimate and should there be any change in the future, we can adjust the account then.

Jeremy535897

The accounts, if they are made up to the date of death, should include the bank balance per the bank statements at the date of death (adjusted for bankings prior to death but not credited by the bank until after death, and for any cheques written before death but unpresented at the date of death). Any bills paid or income received post death, but relating to things before death, should be in creditors or debtors. A solicitor would be more familiar than me with what to include for dilapidations.

oldbikebloke

Jet said:

I do not know what dilipidations I will have to pay (if any) yet as the landlord is not letting me know and the tenancy is unclear as there is no schedule of condition. The solicitor is saying we should make no allowance or estimate and should there be any change in the future, we can adjust the account then.

Do you mean the lease is devoid of any and all repairing obligations, or do you mean there is an obligation to repair the property, but it cannot be evaluated because of the lack of the schedule of condition and therefore the degree of dilapidation?

The solicitor is presumably best placed to deal with this as I assume they are familiar with commercial (agricultural) tenancy law and therefore know what is, and isn't, the norm for such tenancies.

If a liability is crystallised at a later date, the solicitor is correct than an adjustment can be applied for, whether it will be agreed by HMRC if IHT has already been paid and the estate "ascertained" is a moot point, since that focuses attention on why was the liability not there to start with.

Jet

There is an obligation to repair but it cannot be ascertained how much without a schedule of condition. I would expect some negotiation to take place should they make certain demands.

I did wonder if a provision could be made to estimate the costs but the solicitor doesn’t want to do this. With an adjustment to be made later if a different amount is liable.