Accrued dividends paid after death – who do they belong to?

mickandtj

Hello all 

I am dealing with the administration of my late mother-in-law’s estate. The estate received an ex-dividend payment shortly after her death.

I am aware that if a deceased person held ex-dividend shares at the date of death, and the dividend on those shares is paid after death, then the unpaid dividend is an asset of the estate at the date of death for Inheritance Tax purposes.

However in the will there is a specific gift of all the shareholdings to the grandchildren, with the residue going to the daughters. So does the dividend form part of the specific gift of shares, or does it form part of the residue? In other words, do I ultimately pay the dividend to the grandchildren, or the daughters as part of the residue?

The amount involved is not large, but I would like to deal with this matter properly. My own view is that the accrued dividend is income from an asset and not part of it, so it does not form part of the specific legacy of shares. The ex-dividend receipt therefore falls into residue, and not to the legatees.

I am happy to be corrected though, and would appreciate any feedback.

p00hsticks

For what it's worth, my inexpert opinion would be the opposite to yours - the dividends should go to the person left the shares, as they would be if they had actually been given the shares at the date of death. The fact that there is going to be an inevitable delay in actually handing over the shares shouldn't make a difference.

sammyjammy

If the shares didn't exist there would be no dividend ergo in my opinion it should got to the grandchildren, if the estate had been settled before the dividend payment thats who it would have gone to

Keep_pedalling

The dividends should go to the grandchildren.

relaxtwotribes

Sorry, but I disagree with the above replies.  If the will states that the grandchildren will each receive a specific bequest of, say, 1000 ordinary shares in Sainsbury's then that is all they get.  The declared but not yet paid dividend is money owing to the estate at the date of death and is added to the cash balances, which goes to the daughters.

Keep_pedalling

relaxtwotribes said:

Sorry, but I disagree with the above replies.  If the will states that the grandchildren will each receive a specific bequest of, say, 1000 ordinary shares in Sainsbury's then that is all they get.  The declared but not yet paid dividend is money owing to the estate at the date of death and is added to the cash balances, which goes to the daughters.

I believe you are correct and I was wrong. If you sell shares after a dividend is declared but before it is paid you still get the dividend, so the same applies here. Any declared after death go to the beneficiaries of the shares.

mickandtj

Thank you for your responses. In case the wording of the will affects people’s view on this matter, it states: 

“I GIVE free of inheritance tax and all other taxes arising or payable on my death all my interest in any quoted or unquoted shares and [other legacies] to such of my grandchildren as shall survive me and if more than one in equal shares”

getmore4less

What happens to the dividends normally?

Are they reinvested(drip) or get received as cash.

Keep_pedalling

getmore4less said:

What happens to the dividends normally?

Are they reinvested(drip) or get received as cash.

For individual share they are paid as cash, funds can be either paid as cash or reinvested depending on what fund option is taken Acc or Inc.

mickandtj

Keep_pedalling said:

getmore4less said:

What happens to the dividends normally?

Are they reinvested(drip) or get received as cash.

For individual share they are paid as cash, funds can be either paid as cash or reinvested depending on what fund option is taken Acc or Inc.

The dividend in question was simply a normal dividend paid by direct credit to a bank account. It was not part of a DRIP scheme.

getmore4less

Keep_pedalling said:

getmore4less said:

What happens to the dividends normally?

Are they reinvested(drip) or get received as cash.

For individual share they are paid as cash, funds can be either paid as cash or reinvested depending on what fund option is taken Acc or Inc.

I have a stand alone Lloyds holding that drips.