Do Banks Pay Interest On Executor Accounts

oldagetraveller1

I was Executor for my late FiL's Estate. Part of the Estate was a retirement flat which he owned. The Estate could not be distributed to the beneficiaries until the flat had been sold.

The flat originally didn't sell and it was rented out for a few years. The income from that went into an Executor Account with Lloyds who eventually changed it to a Classic Current account. 

When the tenant did move out to a Care Home the flat, fortunately, sold within weeks. 

Only then was it possible to distribute the Estate in full.

Zanderman

oldagetraveller1 said:

I was Executor for my late FiL's Estate. Part of the Estate was a retirement flat which he owned. The Estate could not be distributed to the beneficiaries until the flat had been sold.

The flat originally didn't sell and it was rented out for a few years. The income from that went into an Executor Account with Lloyds who eventually changed it to a Classic Current account. 

When the tenant did move out to a Care Home the flat, fortunately, sold within weeks. 

Only then was it possible to distribute the Estate in full.

That makes sense. Though what's not clear from Rostellan's post above is why the flat they're talking about isn't being sold. Instead they're retaining £150k of beneficiaries cash to do it up over a couple of years. That's what I'm querying as that seems odd. Why can't the beneficiaries take the money and do it up? Why the need for that 150k to stay in an executors account?

Rostellan

You have a point however there are 6 beneficiaries to the estate, if I distribute the funds now then, when the costs are known, someone needs to manage and get agreement and the funds back, which would fall back on me. The beneficiaries are currently happy with my approach to hold the money and pay for the repairs. As soon as I have some idea of the costs I will distribute as much as I can.

oldagetraveller1

I suspect that, in my case, and because the flat didn't sell, there were expenses involved. The Estate had to pay a 6 monthly ground rent and maintenance charge (it was a retirement flat complex with 40+ flats). The building was purpose built and still owned by the "owners". The tenant was liable for Council tax and utilities.

If it was me I would try and sell the flat "as is".

It was only possible to "gift" a small monetary sum to three beneficiaries originally.

As time went on I began to regret agreeing to be the Executor in spite of the rental being looked after by a company which specialised in retirement living rentals! It dragged on for 10 years.

Rostellan

Ouch 10 years! With the new laws on renters rights being introduced renting is now out of the question. No-one will buy it until the costs are know. I think my only option is to wait for the quotes and then distribute what I can.

norbert2

I had the same question as the OP back in 2023 and found an answer then which appears to be good today.  As yet I haven't needed it but Cater Allen, the private banking arm of Santander, offer interest accounts designed for executors.  Unless there are better options out there I expect to use their offerings in the future.  [I have no beneficial interest in Cater Allen or Santander although I am a customer of the later].

oldagetraveller1

Rostellan said:

Ouch 10 years! With the new laws on renters rights being introduced renting is now out of the question. No-one will buy it until the costs are know. I think my only option is to wait for the quotes and then distribute what I can.

Thankfully it sold in February '25. The Estate could then be fully distrbuted.

Yes, ouch, it was an absolute nightmare.

Yorkie1

Out of interest, how much extra hassle does having interest income pose for the tax reporting affairs of executors / the estate? 

Notepad_Phil

Yorkie1 said:

Out of interest, how much extra hassle does having interest income pose for the tax reporting affairs of executors / the estate? 

I guess it depends on how complex the estate is in the first place. If an executor is having to deal with r185 forms and estate tax anyway then provided that a suitable interest bearing account can be found in the first place then the extra complexities (e.g. dealing with incorrectly reported interest as the interest will be reported by the bank/building society as belonging to the executor) is probably usually going to be fairly minimal I'd say.

However given that the amount of interest is probably going to be pretty low compared to the estate assets then is it worth the potential issues of having to deal with an extra source of estate income? In my opinion I'd say in most cases that it wouldn't.