Tax efficient inheritance

While I administer the estate I wonder if anyone has advice on the most tax efficient way of dealing with money from bank accounts etc. Am I able to put some in an ISA and avoid paying tax on the interest? Or could I put some into Premium Bonds where any winnings wouldn’t be taxed. At present it is in a high interest account and have realised that tax will have to be paid at 20% on any interest above £500. 
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  • Emmia
    Emmia Posts: 2,961
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    Put it all in a specific current account that bears no interest, problem solved.

    It's best not to intermingle your own finances with those of the estate you're dealing with, and I don't think you can have new PBs or ISAs in the name of the deceased (existing PBs can only be held for 12(?) months after the death, when they need to be cashed out)
  • Are you the sole residual beneficiary? If you are then you can move the cash into accounts in your own name and treat it as an interim distribution so it is no longer in the estate. If not you can also make interim distributions to other beneficiaries.
  • Thanks for replies.
    No, not sole beneficiary (other beneficiaries fully behind me so no risks there). 
    Some cash has been moved to an account in my own name, but there is some cash still held in deceased accounts as needed probate to access. Now I have access to that I suspect it will be several months before distribution. I think paying some tax on interest is better than getting no interest at all, hence looking at all options. 
    I guess another question is if I put the money into Premium Bonds (which would be in my name) are they still viewed as being part of the estate?
  • Linton
    Linton Posts: 17,029
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    mattsaze said:
    Thanks for replies.
    No, not sole beneficiary (other beneficiaries fully behind me so no risks there). 
    Some cash has been moved to an account in my own name, but there is some cash still held in deceased accounts as needed probate to access. Now I have access to that I suspect it will be several months before distribution. I think paying some tax on interest is better than getting no interest at all, hence looking at all options. 
    I guess another question is if I put the money into Premium Bonds (which would be in my name) are they still viewed as being part of the estate?
    It would be totally wrong for an executor to invest estate assets in their own name.  Dont consider it.  What happens if you die in the meantime?

    I suggest you dont worry about making comparatively small short term gains with estate money but rather focus on gtting the etsate distributed as soon as possible.  If appropriate you could make a partial distribution before everything is settled.
  • km1500
    km1500 Posts: 2,120
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    as executor you can pretty much do what you want with the money as long as you keep records and act in accordance with terms of the will

    this would include for example putting finds in a high interest savings account while you are waiting to distribute it
  • Linton said:
    mattsaze said:
    Thanks for replies.
    No, not sole beneficiary (other beneficiaries fully behind me so no risks there). 
    Some cash has been moved to an account in my own name, but there is some cash still held in deceased accounts as needed probate to access. Now I have access to that I suspect it will be several months before distribution. I think paying some tax on interest is better than getting no interest at all, hence looking at all options. 
    I guess another question is if I put the money into Premium Bonds (which would be in my name) are they still viewed as being part of the estate?
    It would be totally wrong for an executor to invest estate assets in their own name.  Dont consider it.  What happens if you die in the meantime?

    I suggest you dont worry about making comparatively small short term gains with estate money but rather focus on gtting the etsate distributed as soon as possible.  If appropriate you could make a partial distribution before everything is settled.
    So to explain, the reason I have done this is that for various reasons (that I won’t go into), it has taken a significant amount of time (years) to organise probate. My motivation has been based on making best use of the cash that has been released without probate. I have had to put assets in my own name and I don’t think this is uncommon as it seems everyone sets up an account in their name to manage the cash from the estate. I do agree though that a partial distribution seems to be the most sensible option now probate has been obtained. 
  • Emmia
    Emmia Posts: 2,961
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    edited 29 December 2023 at 8:41AM
    When I was the executor of an estate, almost all monies went into a specific executor account which was completely separate from my own finances, which my sibling (a co-executor, who couldn't do the work for personal reasons was also a signatory)

    I did not want a situation to arise where I died during the administration (it can happen, however young, fit and healthy you are) and for there to be issues where the money in my estate, and that of the deceased which I was dealing with were muddled. And if necessary the other executor would have taken over if this was necessary.

    The only exception was a bond, which was due to mature 4 years after the death, which had to go into my name (cashing it early would have lost a chunk of the value). The beneficiaries were all fully aware of this.

    I distributed the estate, and later on the proceeds from when the bond matured, dividing it all as per the will. 

    If you earned interest on the estate proceeds, then as well as paying any tax due, you should also (to be fair) distribute the interest earned between the beneficiaries in accordance with their shares of the will, rather than it being a tidy little earner for you (you were going to do this?)
  • mattsaze said:
    Linton said:
    mattsaze said:
    Thanks for replies.
    No, not sole beneficiary (other beneficiaries fully behind me so no risks there). 
    Some cash has been moved to an account in my own name, but there is some cash still held in deceased accounts as needed probate to access. Now I have access to that I suspect it will be several months before distribution. I think paying some tax on interest is better than getting no interest at all, hence looking at all options. 
    I guess another question is if I put the money into Premium Bonds (which would be in my name) are they still viewed as being part of the estate?
    It would be totally wrong for an executor to invest estate assets in their own name.  Dont consider it.  What happens if you die in the meantime?

    I suggest you dont worry about making comparatively small short term gains with estate money but rather focus on gtting the etsate distributed as soon as possible.  If appropriate you could make a partial distribution before everything is settled.
    So to explain, the reason I have done this is that for various reasons (that I won’t go into), it has taken a significant amount of time (years) to organise probate. My motivation has been based on making best use of the cash that has been released without probate. I have had to put assets in my own name and I don’t think this is uncommon as it seems everyone sets up an account in their name to manage the cash from the estate. I do agree though that a partial distribution seems to be the most sensible option now probate has been obtained. 
    There is no reason why assets that could be released without probate to an executor could not be distributed to the beneficiaries before probate has been obtained providing enough is retained to cover estate expenses. 
  • Definitely intending to distribute any interest earned with other beneficiaries! But really good point about keeping things separate in case of death, I think the whole experience of dealing with an estate has made me realise the importance of keeping things in order (and throwing junk away!)
  • When my husband died earlier this year, his bank were happy for me to open a new account with them in my name and to transfer money from his accounts into it. Within a short time, I also opened an ISA with them using the special rules which allow an ISA to be transferred without impinging on one’s personal annual ISA allowance of £20,000.. It does not matter if the holder will not be the ultimate beneficiary of the ISA. As it happens, I will, but this is not always the case. So I will take this ISA as part of my inheritance, just as another beneficiary will take property as part of hers.
    Even though we have Probate, no distribution has taken place just yet, as some assets are still in the process of being sold. Until then, the amount is uncertain.
    All this is clearly documented, just in case I die before distribution.
    I do know that an estate has no personal allowance for income tax ( usually £1000 in savings interest for many people) so all interest is fully taxable. But as I understand it, the interest on the ISA is not taxable, even for an estate.
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