Incompetent handling of estate by previous executor means 45% tax now due on private pension!

madbadrob

Before screaming sue lol id always ask if there is any chance of this being dealt with through mediation. I suspect from this post that isnt going to bear fruits id bang a claim in the small claims court against the sister. Assuming your step daughter is over 18 this is her choice not your wifes.  Other than that then id take KP advice or just accept the large tax bill, move on and get on with living

Rob

endaf

Marcon said:

endaf said:

Very disappointing information, Do HMRC not have any kind of appeal process? We are able to show incompetent handling of the estate by previous executor & will most likely be suing them due to incompetence. Surely this kind of scenario has occurred in the past with HMRC? 

HMRC isn't at fault - the person who failed to progress the matter is, and that's exactly what they will point out to you. Your claim is against the executor for any tax charge (needlessly) suffered.

To whom is the payment going to be made and in what capacity - the child's mother as a 'bare trustee'?

Hi Macron, just very frustrating that the child suffers for the error of others. I would assume it'll be paid to the mother to hold in trust until she comes of age. 

poppystar

Maybe a lesson to others not to give power away to someone who will not benefit from the huge amount of work involved in dealing with an estate. Your wife, as the mother of your underage daughter, would have been first in line to apply for Letters of Administration and would have had the incentive to deal with everything quickly and correctly. 

Marcon

endaf said:

Marcon said:

endaf said:

Very disappointing information, Do HMRC not have any kind of appeal process? We are able to show incompetent handling of the estate by previous executor & will most likely be suing them due to incompetence. Surely this kind of scenario has occurred in the past with HMRC? 

HMRC isn't at fault - the person who failed to progress the matter is, and that's exactly what they will point out to you. Your claim is against the executor for any tax charge (needlessly) suffered.

To whom is the payment going to be made and in what capacity - the child's mother as a 'bare trustee'?

Hi Macron, just very frustrating that the child suffers for the error of others. I would assume it'll be paid to the mother to hold in trust until she comes of age. 

The child's mother needs to ensure that the child doesn't suffer - and that means expecting the duff executor to make good the loss.

Just a point I've put on your thread in the pension section - check if there's a child's pension payable. I'd expect there to be, in addition to this death grant.

Jowwie

If it is any help, I have now found the letters I got where a tax reclaim was possible. I personally think you will need to wait until you find out if any tax reclaim is possible before you start pursuing the executor. If you can simply reclaim the tax then the issue will go away.

As previously mentioned, in my case this was via an R40 form. On it I needed to specify my tax reference details plus the pension scheme tax reference number that was provided to me by the pension fund after their (taxed) payment was made to the estate.

In the case of a minor there may not be enough information to complete this R40 form on their behalf. The taxes helpline may be able to advise, the number I have is 0300 200 3300. I was also guided to this https://www.gov.uk/trusts-taxes/beneficiaries-paying-and-reclaiming-tax-on-trusts  by the pension provider.

It is possible to fill in the R40 online. It did not work for me though because the  tax reference I received was not quite in the format the form required. I printed and posted it in along with an accompanying letter explaining what I was trying to do.

Two of the funds told me tax reclaim was not possible. They did not provide me with a tax reference number. Possibly this was not correct but due to the circumstances of the estate I was dealing with I did not pursue it.

endaf

Jowwie said:

If it is any help, I have now found the letters I got where a tax reclaim was possible. I personally think you will need to wait until you find out if any tax reclaim is possible before you start pursuing the executor. If you can simply reclaim the tax then the issue will go away.

As previously mentioned, in my case this was via an R40 form. On it I needed to specify my tax reference details plus the pension scheme tax reference number that was provided to me by the pension fund after their (taxed) payment was made to the estate.

In the case of a minor there may not be enough information to complete this R40 form on their behalf. The taxes helpline may be able to advise, the number I have is 0300 200 3300. I was also guided to this https://www.gov.uk/trusts-taxes/beneficiaries-paying-and-reclaiming-tax-on-trusts  by the pension provider.

It is possible to fill in the R40 online. It did not work for me though because the  tax reference I received was not quite in the format the form required. I printed and posted it in along with an accompanying letter explaining what I was trying to do.

Two of the funds told me tax reclaim was not possible. They did not provide me with a tax reference number. Possibly this was not correct but due to the circumstances of the estate I was dealing with I did not pursue it.

Jowwie and others thank you again for your advice and guidance. As is usual the previous executor is one of those “woe is my life ” people with health issues no assets (all hidden away with her family) but still lives the life of Reilly! 

I warned my partner from the start with my concerns it’s just a shame I was proven correct! 

Marcon

endaf said:

Jowwie said:

If it is any help, I have now found the letters I got where a tax reclaim was possible. I personally think you will need to wait until you find out if any tax reclaim is possible before you start pursuing the executor. If you can simply reclaim the tax then the issue will go away.

As previously mentioned, in my case this was via an R40 form. On it I needed to specify my tax reference details plus the pension scheme tax reference number that was provided to me by the pension fund after their (taxed) payment was made to the estate.

In the case of a minor there may not be enough information to complete this R40 form on their behalf. The taxes helpline may be able to advise, the number I have is 0300 200 3300. I was also guided to this https://www.gov.uk/trusts-taxes/beneficiaries-paying-and-reclaiming-tax-on-trusts  by the pension provider.

It is possible to fill in the R40 online. It did not work for me though because the  tax reference I received was not quite in the format the form required. I printed and posted it in along with an accompanying letter explaining what I was trying to do.

Two of the funds told me tax reclaim was not possible. They did not provide me with a tax reference number. Possibly this was not correct but due to the circumstances of the estate I was dealing with I did not pursue it.

Jowwie and others thank you again for your advice and guidance. As is usual the previous executor is one of those “woe is my life ” people with health issues no assets (all hidden away with her family) but still lives the life of Reilly! 

I warned my partner from the start with my concerns it’s just a shame I was proven correct! 

Just checking - you are certain that the child was nominated by the deceased to receive any death grant, and the scheme has confirmed this is the case, rather than just concluding that under the rules of intestacy the little girl is the sole beneficiary?

endaf

Marcon said:

endaf said:

Jowwie said:

If it is any help, I have now found the letters I got where a tax reclaim was possible. I personally think you will need to wait until you find out if any tax reclaim is possible before you start pursuing the executor. If you can simply reclaim the tax then the issue will go away.

As previously mentioned, in my case this was via an R40 form. On it I needed to specify my tax reference details plus the pension scheme tax reference number that was provided to me by the pension fund after their (taxed) payment was made to the estate.

In the case of a minor there may not be enough information to complete this R40 form on their behalf. The taxes helpline may be able to advise, the number I have is 0300 200 3300. I was also guided to this https://www.gov.uk/trusts-taxes/beneficiaries-paying-and-reclaiming-tax-on-trusts  by the pension provider.

It is possible to fill in the R40 online. It did not work for me though because the  tax reference I received was not quite in the format the form required. I printed and posted it in along with an accompanying letter explaining what I was trying to do.

Two of the funds told me tax reclaim was not possible. They did not provide me with a tax reference number. Possibly this was not correct but due to the circumstances of the estate I was dealing with I did not pursue it.

Jowwie and others thank you again for your advice and guidance. As is usual the previous executor is one of those “woe is my life ” people with health issues no assets (all hidden away with her family) but still lives the life of Reilly! 

I warned my partner from the start with my concerns it’s just a shame I was proven correct! 

Just checking - you are certain that the child was nominated by the deceased to receive any death grant, and the scheme has confirmed this is the case, rather than just concluding that under the rules of intestacy the little girl is the sole beneficiary?

Yes that is correct & thank you again for the help youve provided in clearing up the confusion! 

saajan_12

The first priority is working out what tax is actually due and if it can be claimed back by the normal means. Second would be arguing about who's responsibility the delay is and claiming back money from them. That'll be much more contentious and less likely to actually result in money. 

So re what is due, my understanding is that if the person who died was over 75 OR if the money was claimed 2 years later, the recipient would pay income tax on the money, at THEIR rates. So if the child has no other income then the first 12.5k at 0%, then the rest at 20%. That'll get back the lion's share of the tax paid, so should be done first. Note it may work a little differently if the money is held in trust, but info here: https://www.gov.uk/tax-on-pension-death-benefits
If you do employ someone then it should be a lawyer or accountant who specialises in trusts and pensions, though this may eat up too much of the money to be worth it. 

At that point you're back to £5.5k tax (vs £18k at the top whack 45% rate). Then you can decide whether its worth looking into who was responsible for getting the pension paid - I'd have thought that was the beneficiary not the executor. If so, then no one you can really claim off. If it is the executor and they failed in this duty then you might be able to claim the 5.5k from them but this is a long shot. 

endaf

saajan_12 said:

The first priority is working out what tax is actually due and if it can be claimed back by the normal means. Second would be arguing about who's responsibility the delay is and claiming back money from them. That'll be much more contentious and less likely to actually result in money. 

So re what is due, my understanding is that if the person who died was over 75 OR if the money was claimed 2 years later, the recipient would pay income tax on the money, at THEIR rates. So if the child has no other income then the first 12.5k at 0%, then the rest at 20%. That'll get back the lion's share of the tax paid, so should be done first. Note it may work a little differently if the money is held in trust, but info here: https://www.gov.uk/tax-on-pension-death-benefits
If you do employ someone then it should be a lawyer or accountant who specialises in trusts and pensions, though this may eat up too much of the money to be worth it. 

At that point you're back to £5.5k tax (vs £18k at the top whack 45% rate). Then you can decide whether its worth looking into who was responsible for getting the pension paid - I'd have thought that was the beneficiary not the executor. If so, then no one you can really claim off. If it is the executor and they failed in this duty then you might be able to claim the 5.5k from them but this is a long shot. 

Hi saajan,
Im even more confused now as over in the pension forum ive been told no chance of obtaining the 45% tax back or even a portion of it. To be honest even if were able to claim most if it back it would lessen the blow to the child. £20k is a lot over money to lose for something that wasnt of her doing. 
I think what we'll do as a family is employ an accountant that specialised in this type of scenario as to be honest im getting conflicting information on the forum & if theres any chance of claiming some of that 45% back then it worth pursuing. 
Thank you for your input though!