How to split inheritance years after the death?

FreshFruit

The person passed away about 10 years ago, they left a few properties which were rented and a little bit of money. The inheritance tax was paid over a 10 year period and in the meantime the estate was managed as a business with one of the beneficiaries/executors taking a small salary.

The 'will' specified 5 beneficiaries

1 - could take 15% anytime

2 - could take 15% anytime

3 - could take 20% anytime

4 - could take 25% after 2018
5 - could take 25% after 2020

Only 1&2 have claimed their share (10yrs ago), 3, 4 & 5 did not claim the inheritance yet but now they all agree it might be wise to split it up now. With one of the beneficiaries eager to gain ownership of at least one property asap. 

Who would you talk to regarding this? A solicitor? Or are there people who specialise in this area?
I'm assuming the properties will have to revalued and capital gains tax taken into account. 

naedanger

FreshFruit said:

The person passed away about 10 years ago, they left a few properties which were rented and a little bit of money. The inheritance tax was paid over a 10 year period and in the meantime the estate was managed as a business with one of the beneficiaries/executors taking a small salary.

The 'will' specified 5 beneficiaries

1 - could take 15% anytime

2 - could take 15% anytime

3 - could take 20% anytime

4 - could take 25% after 2018
5 - could take 25% after 2020

Only 1&2 have claimed their share (10yrs ago), 3, 4 & 5 did not claim the inheritance yet but now they all agree it might be wise to split it up now. With one of the beneficiaries eager to gain ownership of at least one property asap. 

Who would you talk to regarding this? A solicitor? Or are there people who specialise in this area?
I'm assuming the properties will have to revalued and capital gains tax taken into account. 

I think it would be up the executor to decide, but they may wish to engage a solicitor to check that what they decide is reasonable. Obviously if agreement can be reached with all three remaining beneficiaries this should make it much easier.

Personally, if I was the executor I would say beneficiary 3's share is now (20/0.7)%, and beneficiary 4 and 5 each get a (25/0.7)% share. This totals 100% and keeps the relative shares the same. If everything was to be sold it would then be straightforward - everything is sold by the estate and all debts, including all taxes, are paid and then the money split in the proportions stated. If one person wishes to gain ownership of a property this can be by mutual agreement, which should be possible to obtain provided the remaining beneficiaries' shares are no less than what they would receive were everything sold.

Keep_pedalling

Are the properties held in a discretionary trust? If not none of those conditions are enforceable.

Brynsam

FreshFruit said:

Who would you talk to regarding this? A solicitor? Or are there people who specialise in this area?
I'm assuming the properties will have to revalued and capital gains tax taken into account. 

Solicitors specialise in this area and that's where you need to start.

getmore4less

If 1and 2 took full and final settlement then the split of what is now in the pot is  20%/0.7 and 2 lots of 25%/0.7

How is the estate property held now? 

Have the been transferred to anyone? 
Held in trust
Or were they transfered to the business? 

The paper based is easy. 
Value the estate,
Work out tax liabilities 
Work out the shares


Work out is person taking the property needs to pump in cash if their share won't cover the cost. 

Dispose of the properties. 

Depending how they are owned will determine how that gets done. 

Adjust final distribution once disposals are completed. 

If still with tenants that may not be straightforward or quick. 

Manxman_in_exile

I don't understand this - am I being thick?

Where does the 0.7 come from?  Are we saying it represents what's left for beneficiaries 3, 4, and 5, because 1 and 2 took their shares (15% each) ten years ago?  So if 1 and 2 have already taken their inheritances why are the remaining three sharing only 70% of anything, surely they are entitled to share 100% of what is left?

It seems a particularly daft arrangement to me, especially as the three remaining beneficiaries seem to have continued the business of renting out the properties which presumably are worth much more than they were ten years ago. 

How does all that get accounted for?  Somebody must be losing out...

naedanger

They are not only getting 70% i.e. why you need to divide by 0.7, which is the same as dividing by 70%.
Doing the arithmetic, the percentages the remaining beneficiaries get of the remaining estate are:
Beneficiary 3 = 20%/0.7 = 28.571%
Beneficiary 4 = 25%/0.7 = 35.714%
Beneficiary 5 = 25%/0.7 = 35.714%
Between them they are getting 28.571% + 35.714% + 35.714% = 99.999% or actually 100% if you do the figures to more decimal places. So the 3 remaining beneficiaries get all the remaining estate between them.

Manxman_in_exile

Ah - OK - brain fade! 

For some reason I read "/0.7" as multiplying by 70% rather than dividing by 0.7

But for brain fade I would have just given the third beneficiary 2/7ths and split the remainder equally between 4 and 5

Maybe it's still brain fade, but how would you do the distribution to the first two beneficiaries  ten years ago, and deal with the others now?  I'm still struggling to get my head round it...

mjm3346

Manxman_in_exile said:

Ah - OK - brain fade! 

For some reason I read "/0.7" as multiplying by 70% rather than dividing by 0.7

But for brain fade I would have just given the third beneficiary 2/7ths and split the remainder equally between 4 and 5

Maybe it's still brain fade, but how would you do the distribution to the first two beneficiaries  ten years ago, and deal with the others now?  I'm still struggling to get my head round it...

The first ones don't get anymore and the 0.7 is working the other shares up to take care of the balance which is only shared between the 3 remaining

naedanger

Manxman_in_exile said:

Ah - OK - brain fade! 

For some reason I read "/0.7" as multiplying by 70% rather than dividing by 0.7

But for brain fade I would have just given the third beneficiary 2/7ths and split the remainder equally between 4 and 5

Maybe it's still brain fade, but how would you do the distribution to the first two beneficiaries  ten years ago, and deal with the others now?  I'm still struggling to get my head round it...

The split ten years ago could have been problematic because there could have been arguments over the valuation of particular assets.

Presumably beneficiary 1  took assets that they were happy with e.g. because they felt there were at least equal in value to their share (i.e. 15% of the then total value). Likewise beneficiary 2.

And presumably beneficiaries 3 to 5 were each happy at that time that beneficiaries 1 and 2 were (at least in aggregate) being permitted to take the share that they were taking.

(Agreement would be easiest where beneficiaries desired different assets.) 

If there wasn't agreement then it would have been for the executor to be satisfied (presumably based on expert asset valuations and advice) that each beneficiary was getting their fair share. And if the executor had been very concerned about being held liable in any dispute they could (will permitting) just have sold everything and used the percentages specified in the will. Though such liquidation might not be the best way of realising value.

In any event as everyone was happy beneficiaries 1 and 2 combined have taken their shares it is just left to share out the remaining amount (and that remaining amount is likely to have a very different amount now than it did when beneficiaries 1 and 2 took their shares) between the other three using the percentages given earlier. (If at this point beneficiaries are unhappy with what the others got ten years ago then tough. The time to have objected to that split was ten years ago.)

All this is obviously just the high level arithmetic principle. I expect there are other technical and practical considerations, e.g. especially given the estate has been managed as a business for ten years (which I expect is quite uncommon).

getmore4less

Manxman_in_exile said:

Ah - OK - brain fade! 

For some reason I read "/0.7" as multiplying by 70% rather than dividing by 0.7

But for brain fade I would have just given the third beneficiary 2/7ths and split the remainder equally between 4 and 5

Maybe it's still brain fade, but how would you do the distribution to the first two beneficiaries  ten years ago, and deal with the others now?  I'm still struggling to get my head round it...

The other way to do the calculation for 345 is  4/14 5/14 5/14 which is what you suggest. 

Works out the same.