Distributing estate early

Regalia6969

Hi gang,

Dealing with estate as executor. Under some pressure from beneficiaries for their inheritance. Everything with the estate is done and ready, there are just a couple of outstanding debts/liabilities to settle that could still take some months to work out, i.e. DWP for potential overpaid benefits.

Aside from being personally liable for any remaining debts, are there any legal ramifications against distributing to beneficiaries early? I.e. before all final debts are settled?

Was thinking of witholding a safety net float of cash in the exec account for final debts and distributing the rest to get beneficiaries off my case. Anyone done this before?

Technosaurus

I mean there's nothing TECHNICALLY stopping you distributing early, it's just unwise while there are still debts.

Your job is to distribute the estate. There's nothing saying when you have to do it, just as long as you do it in accordance with the will. As you say, you'll be personally liable if anything goes wrong and if these people are putting pressure on you I suspect they won't be seen for dust if you've done your maths wrong.

If you're reasonably certain on the amounts in play there's nothing stopping you doing a partial distribution. Eg there's £100k waiting to be divvied up and the bill might be £250, sharing out a decent part of it now is neither here nor there. Just keep good records of who got what and when. If it's £10k waiting to be divvied up and the DWP might want £5k, then it's less sensible!

In short, no legal ramifications but definitely good practice to wait. If it helps, HMRC were quite fast at telling me what I owed for overpaid benefits to a deceased person, sorted it over the phone.

poseidon1

Just to back up @Technosaurus, if you were to overdistribute the beneficiaries are hardly likely to come to your aid and reimburse a portion of what you paid out to them.

Therefore if contemplating an interim payment ( to get them off your back) err on the cautious side with the amount.

Incidentally if there has been estate income exceeding the £500 threshold upon which you are bound to pay estate income tax, dont overlook your responsibilities here.

I note in this regard a property was supposed to sold, so depends on whether those funds were placed on deposit or earning solicitor's client account interest.

Regalia6969

https://forums.moneysavingexpert.com/discussion/comment/82137432#Comment_82137432

Apologies but could you go more into detail? Just so I get clearly what you mean.

There was a property sale on this estate and all the estates funds were placed into an executor bank account by myself which accrues no interest. The only positive financial benefit has been for things like rebates and refunds e.g. council tax rebate after property sale.

Regalia6969

https://forums.moneysavingexpert.com/discussion/comment/82137390#Comment_82137390

Thanks @Technosaurus that's very helpful.

In this instance theres approx 200k altogether and about 17k of that to go to named beneficiaries, the rest is split between myself and 2 members of my immediate family.

My thought was to pay named beneficiaries their full amount and keep about 15k in the pot from the residual, which would cover 20 years of clawed back benefits by my calc (the worst case scenario and praying the real bill will be nowhere near this amount.) Distrubute all else between us 3, then once bills are settled, redistribute the remainder...

But as I say, wasn't sure on it from a legal standpoint.

Technosaurus

Hi @Regalia6969 - thanks for the additional detail.

Given those numbers I can see why you are tempted to just give them their cash and be done with it!

However also given that your calculation involves a worst case scenario of some 20 years of benefits that may or may not be clawed back, I'd definitely be tempted to speak to the DWP first and see what's what. I'm no expert on benefits but I'd be amazed if they can go back 20 years, usually the legal 'cutoff' for disputed payments is 6 years, but as I say I don't know the circumstances and it may be different for certain benefits.

Worth speaking to your other family members (the 2 larger beneficiaries) and see what they think about any potential interim payments, you wouldn't want to be accused of favouritism, especially if immediate family are waiting longer than the others - people get VERY weird around money so for your sake it's best to be candid. They may well agree with your thoughts of course.

poseidon1

https://forums.moneysavingexpert.com/discussion/comment/82137476#Comment_82137476

If you have avoided any post death income from arising then there is no estate income tax to worry about. Presumably however there was also no taxable gain on the property sale compared to its probate valuation?

As for the beneficiaries entitled to £17k each I assume this is a % share of estate residue, rather than fixed pecuniary legacies.

If they were fixed legacies, executors have 1 year from death to distribute to avoid having to calculate and pay a statutory amount of interest thereon.

Keep_pedalling

unless you think there is a real risk that that the estate owes 6 figures in overpaid benefits I would pay out the £17k to get rid of that obligation.

Regalia6969

https://forums.moneysavingexpert.com/discussion/comment/82137536#Comment_82137536

No capital gains tax on the property sale, no. However the 17k is the sum of all the fixed legacy recipients, (10k to one person + 5k to another + 1k etc). What remains after that is residual. However these funds are all coming from the sale of the property, it hasn't been possible to pay anyone within the first year as the sale only completed a few weeks ago. Could you please tell me more about this statutory interest? I'd never seen that anywhere before.

poseidon1

https://forums.moneysavingexpert.com/discussion/comment/82137569#Comment_82137569

I suspect you are not the only one unaware of statutory interest on pecuniary legacies - see article below which helpfully sets out the relevant interest rates -

https://www.footanstey.com/our-insights/articles-news/a-guide-to-pecuniary-legacies-and-statutory-interest/

Pecuniary legatees take precedence over residuary legatees hence the need to compensate them after the executor's year has elapsed and payment remains outstanding.

Albermarle

https://forums.moneysavingexpert.com/discussion/6683399/distributing-estate-early

I think referring to the forum members as a gang, is a first 😄