Am I administering property correctly?

My late husband died last year and I am the sole beneficiary of his estate (baring a few sentimental bequests and a charitable donation). I notified the 'Tell Us Once' service, informed his banks, credit card companies, mortgage company, etc. A few of the banks sent me small amounts of money and closed accounts, I used this to in turn pay off a couple of small debts (a credit card and a couple of other outstanding bills).

My husband was the sole owner of a flat that has been rented out for the last few years. It has a mortgage which is about 20-25% of the property value. The mortgage company suspended the monthly payments due on the mortgage for 12 months once they received the death certificate, and I have made the maximum overpayment allowed on the mortgage to reduce the interest. Once I receive the Grant of Probate I can pay off the mortgage but if I do so before hand I will need to pay the exit fees, etc so it's better to just wait given the figures involved.

Ultimately when Probate is granted I will have to use some of my savings to pay off a portion of the mortgage to avoid selling the property. (Credit card debt and what remains on the mortgage is more than what my husband had in sole savings).

As the property is currently rented out it is obviously producing an income. As the property is to become mine, I have been assuming that from the date of death onwards, any income and expenditure on the property is my responsibility. In January there was about £2000 due for the half yearly service charge, ground rent, etc.

My question is, should the rental income and expenditure such as the service charge etc be administered as being part of my late husband's estate, or am I free to proceed as I am. In reality the issue will depend on how I record the transactions in my role as executor and how it is reported to HMRC (ie whose income and expenditure it becomes for income tax purposes). HMRC sent my tax return forms from the 2022-23 tax year which have been submitted and a 2023-24 tax return which is for the period covering the beginning of the tax year until date of death. I think that is why I've been assuming that the income and expenditure from that date on is my responsibility and not my late husband's but I stand to be corrected.

Many thanks

Comments

  • km1500
    km1500 Posts: 2,120
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    if your husband was the sole owner then until probate is granted the property does not belong to you it belongs to the estate and you are just administering it

    thus all expenses and income should be accounted for on the accounts of the estate not your personal account

    once probate is granted and you as the beneficiary receives the flat then of course everything then transfers to your personal account
  • Keep_pedalling
    Keep_pedalling Posts: 16,193
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    Did your husband use an accountant to file his tax returns? If he did then I would speak to them, if not it might be worth engaging one to handle this.
  • Notepad_Phil
    Notepad_Phil Posts: 1,320
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    https://www.litrg.org.uk/tax-guides/bereavement/how-does-personal-representative-deal-income-and-capital-gains-arising-after may come in useful to you. There is also a section in there regarding when the income coming into the estate is eventually paid out to you as the beneficiary.
  • RAS
    RAS Posts: 32,457
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    Please also go over to the renting and selling forum unless you have experience letting property.

    Have you formally told the tenants that their new LL is "the estate of Mr km1500". Have you checked the tenancy deposit scheme, ensured the electricity and gas certificates are up to date, etc, etc?

    If not, you as executor and in future you are LL could get into a mess. 

    There is a very good stickie, top of the main page, for LLs and tenants although it's getting a bit out of date. Read first and ask any queries. 


    The person who has not made a mistake, has made nothing
  • pjs493
    pjs493 Posts: 154
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    RAS said:
    Please also go over to the renting and selling forum unless you have experience letting property.

    Have you formally told the tenants that their new LL is "the estate of Mr km1500". Have you checked the tenancy deposit scheme, ensured the electricity and gas certificates are up to date, etc, etc?

    If not, you as executor and in future you are LL could get into a mess. 

    There is a very good stickie, top of the main page, for LLs and tenants although it's getting a bit out of date. Read first and ask any queries. 



    Thanks for these points, despite the property being in my husband's sole name, we have been dealing with the letting of it as a couple for several years. It helped for me to be quite involved because my husband often travelled with his job and was not contactable, sometimes for long periods of time, so I was often the first point of contact for any ongoing maintenance issues, etc. It's electric only and relevant certificates and inspections are carried out annually, for example we changed the fire alarms at the last annual inspection because they were about to go out of date.

    I haven't informed the deposit protection scheme as I intended to do that once the Grant of Probate came through, the tenants were happy with that plan. 

    Our tenants have been in the flat for a while and don't plan on leaving any time soon. I've kept them informed along the way and I wrote what was essentially a covering note for the tenancy agreement noting the death of my husband and that I was executor of the Will, etc etc. and sent them a copy which all parties signed.

    I've informed the management company of the building, etc. Bills for service charges, ground rent, etc have been in the name of 'the estate of XXXX' and I've been informed by the management company that they will change the name to mine once I send them a copy of the Grant of Probate. Once I have that and I've paid off the mortgage I'll obviously need to update the Land Registry as well.

    From your reply, and the replies of others, it sounds like I will have to do a tax return for the period that the estate was being administered while awaiting the Grant of Probate. I'll get onto HMRC to ask about this as I also learned today that there is a substantial payout due from his employer to the estate due to my husband having a huge leave balance accrued when he died (worth approx £10k). Presumably this is taken into account for the 'administration' period too rather than his April 23 to date of death tax return.
  • pjs493
    pjs493 Posts: 154
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    km1500 said:
    if your husband was the sole owner then until probate is granted the property does not belong to you it belongs to the estate and you are just administering it

    thus all expenses and income should be accounted for on the accounts of the estate not your personal account

    once probate is granted and you as the beneficiary receives the flat then of course everything then transfers to your personal account

    Thank you. This makes a lot of sense and I imagine I'll have to complete a tax return for the 'administration' period to account for this correctly.
  • pjs493
    pjs493 Posts: 154
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    Did your husband use an accountant to file his tax returns? If he did then I would speak to them, if not it might be worth engaging one to handle this.

    Yes he did. He usually sent them an excel spreadsheet with everything in it and they submitted his tax return for him. For the 2022-23 tax year I made sure the spreadsheet was completed fully and sent it to the accountant who submitted it on his behalf. Fortunately my husband was good at keeping his spreadsheet up to date and his receipts were neatly filed in a folder so it was easy for me to overlook everything and ensure it was all complete and in order to forward to his accountant.

    I've already discussed the upcoming 2023-date of death return with them, which I can't submit until April. The accountant was able to submit the last one electronically, but I believe this one will have to be a paper return. I'll chat to his accountant about a return for the 'administration' period too. I'm also going to give HMRC another ring. Their bereavements team have been really helpful so far and not a huge amount of waiting time on the phone either.
  • pjs493
    pjs493 Posts: 154
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    https://www.litrg.org.uk/tax-guides/bereavement/how-does-personal-representative-deal-income-and-capital-gains-arising-after may come in useful to you. There is also a section in there regarding when the income coming into the estate is eventually paid out to you as the beneficiary.

    Thank you for the link. This is really helpful.
  • pjs493
    pjs493 Posts: 154
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    Thanks for all the really helpful advice here. I think I've replied to every comment. As usual this forum is super helpful and informative. 

    I'll speak to my husband's accountant and HMRC. 

    I'll also adjust the spreadsheet I've created as executor and make sure the income and expenditure is recorded correctly and keep receipts with other stuff I have in a folder. It also helps for me to prep my own tax return for this year.

    As I mentioned in one of the replies, I also learned today that there is a substantial salary adjustment due to the estate because of a massive leave balance that my husband had accrued. I'm presuming I will have to submit a tax return for the 'administration' period, but will call HMRC to confirm this with them directly.
  • pjs493
    pjs493 Posts: 154
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    So having consulted with HMRC, it seems that the figures for the administration period will be rather small so I won't need to complete a tax return, I only need to write to HMRC at the end of the administration period and let them know how much tax is due. They will in turn let me know how I can make the final tax payment which is likely to be in the region of £100-200, although there is already a credit on the account with HMRC so it might be that ultimately I end up receiving a tax refund.
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