Distribution of Estate - questions

Sarahspangles

OH is preparing to make an interim distribution of most of his parents' estate. He will be holding back a small amount for known expenses still to come, plus a buffer in case we've missed anything. I'm drafting Interim Estate Accounts now, with the intention that when the final distribution takes place, probably in December, we will only need to add the outstanding expenses to the Administration Expenses table and a line to the Distribution calculation, to include the second payment to beneficiaries.

I've used https://www.co-oplegalservices.co.uk/media-centre/articles-sept-dec-2018/what-are-estate-accounts/ as a guide to the format of the Estate Accounts and I've got a couple of questions. Please

Estate income from savings interest has to be reported to HMRC if above £500 (it's gone up since the co-op article) - is that per tax year or for the whole administration period? If the latter, there's just a chance we can stay below the limit this year by making the interim distribution very quickly.

If not, and the income has to be reported then we understand the estate has to pay HMRC their 20% tax from the money retained in the Executors Account, and then give Form R185 to the beneficiaries. All the beneficiaries are family and I'm considering providing this link https://www.litrg.org.uk/tax-guides/savers-property-owners-and-other-tax-issues/introduction-trusts/income-trust-or-estate to help them work out any impact on their personal tax position. I assume it is entirely 'on them' whether they do anything? There's no comeback on the Executors (who are also beneficiaries) if a beneficiary decides not to pay the extra tax due because they are higher rate taxpayers? And no requirement for the Executors, if asked to do so, to delay their share of the distribution so it falls into a later tax year?

Then, I got to the bit about Administration Expenses where examples of eligible expenses include Bankruptcy searches on Beneficiaries. Do people actually do that?

Marcon

Sarahspangles said:

OH is preparing to make an interim distribution of most of his parents' estate. He will be holding back a small amount for known expenses still to come, plus a buffer in case we've missed anything. I'm drafting Interim Estate Accounts now, with the intention that when the final distribution takes place, probably in December, we will only need to add the outstanding expenses to the Administration Expenses table and a line to the Distribution calculation, to include the second payment to beneficiaries.

I've used https://www.co-oplegalservices.co.uk/media-centre/articles-sept-dec-2018/what-are-estate-accounts/ as a guide to the format of the Estate Accounts and I've got a couple of questions. Please

Estate income from savings interest has to be reported to HMRC if above £500 (it's gone up since the co-op article) - is that per tax year or for the whole administration period? If the latter, there's just a chance we can stay below the limit this year by making the interim distribution very quickly.

If not, and the income has to be reported then we understand the estate has to pay HMRC their 20% tax from the money retained in the Executors Account, and then give Form R185 to the beneficiaries. All the beneficiaries are family and I'm considering providing this link https://www.litrg.org.uk/tax-guides/savers-property-owners-and-other-tax-issues/introduction-trusts/income-trust-or-estate to help them work out any impact on their personal tax position. I assume it is entirely 'on them' whether they do anything? There's no comeback on the Executors (who are also beneficiaries) if a beneficiary decides not to pay the extra tax due because they are higher rate taxpayers? And no requirement for the Executors, if asked to do so, to delay their share of the distribution so it falls into a later tax year?

The executors are only responsible for reporting interest earned before assets are distributed to beneficiaries. After the cash has been paid over, it becomes the property of the recipient and it is for them to report any interest (if indeed the interest they get is high enough to need reporting to HMRC) received from the date they receive the cash.

It is up to the executors to decide when to make any distribution.

Sarahspangles said:

Then, I got to the bit about Administration Expenses where examples of eligible expenses include Bankruptcy searches on Beneficiaries. Do people actually do that?

Many executors don't, simply because they don't understand the legalities of paying to a bankrupt beneficiary. If they did, then yes, they'd actually do that!

macman

Your last question: yes, because if you make a payment to a beneficiary who is bankrupt, and those funds are beyond the trustee's control, then the trustees can potentially seek to recover that sum from the executors.

Marcon

Sarahspangles said:

Estate income from savings interest has to be reported to HMRC if above £500 (it's gone up since the co-op article) - is that per tax year or for the whole administration period? If the latter, there's just a chance we can stay below the limit this year by making the interim distribution very quickly.

See https://www.gov.uk/guidance/bank-and-building-society-interest-returns#deceased-investors and scroll down to the relevant section.

Sarahspangles

Marcon said:

Sarahspangles said:

Then, I got to the bit about Administration Expenses where examples of eligible expenses include Bankruptcy searches on Beneficiaries. Do people actually do that?

Many executors don't, simply because they don't understand the legalities of paying to a bankrupt beneficiary. If they did, then yes, they'd actually do that!

After I asked, I spotted that the completion statement for the house sale included £4 for bankruptcy searches by the conveyancing solicitor - presumably this was on the two executors. I think 'family' might be offended though. I can always have a line for 'Sundry minor expenses'!

Sarahspangles

Marcon said:

Sarahspangles said:

Estate income from savings interest has to be reported to HMRC if above £500 (it's gone up since the co-op article) - is that per tax year or for the whole administration period? If the latter, there's just a chance we can stay below the limit this year by making the interim distribution very quickly.

See https://www.gov.uk/guidance/bank-and-building-society-interest-returns#deceased-investors and scroll down to the relevant section.

That's very helpful thank you. It gives us a little longer.