Determining end date for administration period - help needed...

probate_slave

The apportioning will be clear once you look at the R185 for estate income. Please ignore my remark about earlier capital distributions which hopefully doesn't apply.

I assume the shares belong to the residue. May I ask whether you have already transferred your wife and son's shares to them in specie, or sold them? Or at least appropriated them. Because if not, the estate income can't yet be known.

ijholdie

@probate_slave I have transferred the shares to myself (the beneficiaries did not want the shares), and I am assuming that I can apportion the beneficiaries percentage of the value of the shares (as valued on the day of my father's death?) to them as part of the distribution?

I am assuming no tax is due, as they have only been transferred to me, not sold (so no gain), and their apportioned value passed to the beneficiaries, but again, I would appreciate some guidance.

probate_slave

Then I would make the date of transfer of shares (to yourself) the date that they leave the estate. You acquire your own portion at probate value, but you acquire your wife and son's portion at the value on that date. So no CGT for you, but they have made a disposal to you and are chargeable to CGT on the gain on value since probate.

In terms of estate income, if any shareholdings were marked ex-dividend at the date of transfer, the first dividends on those shares received after the date of transfer are estate income. Anything received after that is your own personal income. As the transfer was made in 2025/26 it will greatly simplify matters if you send the informal arrangements letter before April 6th this year.

I am not sure whether you can make a retrospective appropriation of shares at the date of death, other than by deed of variation. Perhaps others may comment. The advantage of my suggestion above is that estate income will be shared between you in the proportions of the will.

ijholdie

@probate_slave thank you, I will try to determine the figures and dates put them on here to check if I have understood this correctly.

In terms of the informal letter to HMRC for the estate, there is presumably still no capital gains tax due for the shares in question, just the income tax from the dividends up to the point of transfer (If I adopt your approach above)?

probate_slave

Absolutely, no CGT due on the estate. Only income tax on dividends up to the point of share transfer, but including ex-dividends paid later, if any. Plus income tax on interest up to the closure of your father's accounts.

ijholdie

@probate_slave could you have a look at the figures below, and check this is correct…

Value of all shares on date of death for probate: £26,177.26

Value of all shares on transfer date (when transferred to me): £39,435.20

I acquire my 83% share at probate value on the transfer date (83% x £26,177.26) = £21,727.13

My wife's 7% value of shares on date of death: £1,832.41

My wife's 7% value of shares on transfer date: £2,760.46

I acquire my wife's 7% value (£2,760.46) on transfer date. My wife's gain on disposal: £928.05

My Son's 10% value of shares on date of death: £2.617.73

My Son's 10% value of shares on transfer date: £3,943.52

I acquire my son's 10% value (£3,943.52) of shares on transfer date. My son's gain £1,325.79

Both my son and wife's gains are below the CGT threshold of £3000, so presumably they owe no CGT?

Also, how on earth do I show the above situation in the final estate account which I am starting to look at (I would really appreciate your advice, as again there appears to be little detail on the format for the final estate account available)?

probate_slave

That all looks correct so far. Agreed, no CGT on your wife and son, and no need for them to declare either. The treatment is favourable since it has raised your book cost.

I would be inclined to deal with estate tax before tackling the accounts, but here goes.You will need (at least) these sections: Schedule of assets at date of death/ Liabilities/ Income account/ Expenditure account/ Capital account/ Distribution account.

As far as the shares go, the Capital account will add the capital gain (£13,257.94) to the net estate, and thus include £39,435.20 in the amount of residue available for distribution.The 83:7:10 ratio is applied to the value at date of appropriation (ie transfer). So the Distribution account will show ijholdie £32,731.22/ wife £2,760.46/ son £3,943.52. Then you simply reimburse these amounts to the other beneficiaries from the other assets.

ijholdie

Thanks @probate_slave. I have sent off the informal letter to HMRC detailing the amount of tax due from the estate.

Would you mind breaking down the sections required for the final estate accounts in simpler terms.

I have kept an executor's account - and in simple terms, money has gone into that account (from the closure of the deceased's bank/BS accounts, ISA's, dividends and sale of house, and refunds. And money has gone out - to pay utilities and expenses. I thought there would just be a simple in and out section (don't laugh! :-) ) - so could you explain where these things fit into the sections you mentioned above (please bear in mind that I am struggling even to understand the difference between the capital account and expenditure account (I thought the capital account listed all the banks/bs/ISA's and also the expenses/outgoings)?

probate_slave

Estate accounts are a statutory requirement to prove that the deceased estate has passed to beneficiaries according to the Will. The executor's bank account will show cash flow post-grant, but not unliquidated assets like shares or the Louis XV furniture, nor pre-grant expenses like IHT, income tax of the deceased etc. I agree that the templates shared on the forum are simplistic. The Financial Times "Guide to Inheritance Tax, Probate and Estate Planning", Amanda Fisher (2010) was never updated and contains howlers, but shows a clear, typical set of accounts and is available digitally. I could also show you what I mean when I get home tonight.

ijholdie

"I could also show you what I mean when I get home tonight." @probate_slave I would really appreciate that.

The main thing I am struggling to understand is the things you mention above, like my Dad's personal possessions, Car and Shares which I did not sell. So there is no money in the executor account to represent these things, and therefore I don't understand in the estate account how to represent them, and more importantly, I don't understand how when I distribute the remaining money in the executors account to the beneficiaries; how this works?

The shares you helped me with are a good example. I didn't sell the shares (all transferred them to myself), but the other beneficiaries are owed the money from passing their share to me (£3,943.52 owed to my Son and £2,760.46 owed to my wife). But the money owed to them is not in the executors account (because they were never sold)…. guessing I simply subtract the £3,943.52 and £2,760.46 from my distribution, and add them to my Son's and wife's distribution?

"As far as the shares go, the Capital account will add the capital gain (£13,257.94) to the net estate, and thus include £39,435.20 in the amount of residue available for distribution.The 83:7:10 ratio is applied to the value at date of appropriation (ie transfer). So the Distribution account will show ijholdie £32,731.22/ wife £2,760.46/ son £3,943.52. Then you simply reimburse these amounts to the other beneficiaries from the other assets."

…would it be possible for you to show me which sections of the estate report these figures get entered in, and the simple maths behind it to work out the distributions (sorry, I realise you have spent alot of time helping me, and I massively appreciate your help as I am struggling to get my head around this).