Reporting an estate to HMRC as executor/beneficiary. Will I be out of pocket?

EzraHawkwind

"Reporting an estate to HMRC

You may need to send information to HM Revenue and Customs (HMRC) about the estate’s income from the day after the death until the date everything has been passed on to beneficiaries (the ‘administration period’)."

I'm probably being very dim here, but if I have to pay tax from the executor's account on any savings interest earned during this period, but I won't know exactly how much there is to pay until I've distributed the estate, will I be losing out (also being a beneficiary), or have other executors just kept some money aside from the estate for this?  If so, how have they explained it to other beneficiaries?  There's only me and the other lives abroad, but I don't want either of us to be out of pocket because of this.

Hope this makes sense and I've not got it all confused. Thank you.

Thrugelmir

You'll know what what interest has been earnt prior to distribution of the estate. Suitable provision can be made , declared and paid for any tax due. 

p00hsticks

How will you ever be out of pocket ?

If additional money comes into the estate after the date of death but before the estate is distributed (e.g. rental income on property, dividends on shares, interest on savings, then there may be tax to be paid from it, but even when the tax is deducted it's still money over and above what was left at the time of death.....

EzraHawkwind

This is the bit that's confusing me: "Until the date everything has been passed on to beneficiaries".

As I say I'm probably being totally daft here, but I was thinking that I could only submit details of the interest once the estate was distributed. If it's a 50/50 distribution, then I guess the tax would need to be paid out of my share because the other half would have already received theirs?

Thrugelmir

The bank account you accumulate the funds in prior to distribution should be non interest bearing, i.e. a designated probate account. 

EzraHawkwind

"The bank account you accumulate the funds in prior to distribution will be non interest bearing."

Ah, that makes more sense now. Thank you.

Linton

EzraHawkwind said:

This is the bit that's confusing me: "Until the date everything has been passed on to beneficiaries".

As I say I'm probably being totally daft here, but I was thinking that I could only submit details of the interest once the estate was distributed. If it's a 50/50 distribution, then I guess the tax would need to be paid out of my share because the other half would have already received theirs?

You should distribute money to all similar beneficiaries at the same time, so should not be in the position where you have fully paid out to one with unexpected costs falling on others who have not yet received their bequest.

The usual way around the problem is to have a partial distribution, it could be 90%, to all beneficiaries leaving money in the pot until you are sure that there will be no further costs.