Dearborn

[Dearborn]

My sister and I are named co-executors of our father's will.
After he died we had a probate valuation of the house and contents. We applied and received probate certification without problem. There was no Inheritance tax (IHT)to pay.
The house and contents have since been sold and the amount obtained is above the original valuation. BUT it is below the allowance amount combining both our parent's allowance. Our mother died previously and left everything to our father.

#### Do we have to notify anyone ie Probate office, of this increased amount if it is bellow the allowance threshold, and in what format should this be done? Currently we have everything on spread sheets.

We have different interpretations of what is eligible for Capital Gains Tax, (CGT). Is it based on the amount over and above the original probate valuation, or is it on any money accrued on investments after the death and before the investments are distributed, eg shares? We have a letter from the tax office saying there is no personal tax payable.

#### Which interpretation is correct? What is the threshold for CGT, and do we have to declare dividends if they are less than that amount?

As there are some contentious beneficiaries; We are planning on sending out a letter with all final finances in spread sheet format once they are complete. We will include a return letter to sign to verify acceptance of the finances.

#### Do we have to officially "sign off" with anyone, eg probate office, tax office, anyone else, and include this verification with the spread sheets? Once the above acceptance letter is signed and returned to us, will we be liable for any "come back"?

Thank you for your clarification on these points, it would be MUCH appreciated.

[Peridot]

Hi Dearborn,

It can appear very complicated there are in effect several separate issues here, which I'm sure you have already worked out.

The Probate valuation is the value of the assets at the date your father died. This is where the Nil Rate Band allowance (NRB) comes into play and with married couples upon the survivors death the potential 'double' figure allowance being applied before any inheritance tax (IHT) is payable. So on todays allowance of £325,000, if on the death of the first of a married couple they left everything to their spouse which attracts the spousal exemption and none of their NRB was used for gifts to others then the whole NRB allowance is transferred to the survivors estate effectively allowing a NRB of £650,000 before any IHT would be payable, on the 2nd death. The probate valuation is 'fixed' and the figure that the IHT is calculated from.

Following probate there may be some discrepancies in the values achieved for certain assets such as a property, particularly if it takes a while for property or shares to be sold.

You haven't indicated the time between the property valuation and the sale. If it is not a matter of years since probate was obtained would be sensible to provide a corrective account (C4) to HMRC despite an increase not taking the estate over the NRB allowance threshold. What sort of property valuation did you obtain? If you believe the valuation at the date of death was incorrect then it can be argued this is the case although if you had property values from a number of estate agents or a surveyor that state this is a date of death valuation, it may be difficult to argue this. It can be helpful in cases where IHT has been paid and the property value has dropped but that does not appear to be the case here.

From the sounds of it you would be sensible providing a corrective account to HMRC, if nothing else to demonstrate to the beneficiaries everything has been completed above board and to obtain confirmation from HMRC that this aspect of the potential IHT tax liability is dealt with and nothing is due.

As far as any capital gain is concerned, death is not classed as a disposal for CGT purposes which means that if a property is transferred to beneficiaries upon death there is no charge to CGT. Any future sale of the property would leave the liability for CGT squarely with the beneficiaries (who are then the owners of the property). However, sale of an asset by the executors (personal representatives or PR's), is a disposal for CGT purposes. This would include property, shares, single valuable items etc. The usual personal allowances apply to any gain, together with all sale costs associated with the asset sale, before tax becomes payable but it needs to be dealt with. This gov't link will help you make the calculation:- https://www.gov.uk/capital-gains-tax and how to pay link https://www.gov.uk/capital-gains-tax...ital-gains-tax HMRC are usually pretty helpful so it would be worth giving them a call if you get stuck.

As far as investments are concerned, are you talking about shares that have increased in value or interest bearing bank accounts? There are differences between capital gains and income earned on shares by way of dividends, or interest on bank accounts. Most bank accounts and dividends paid on shares will already have had the tax due paid, but you need to check this is the case. If you are unsure the bank or stock broker will be able to confirm this and provide the appropriate certificates for your records, that can be sent to HMRC when dealing with the income tax position. Any interest accrued since death does need to be declared to HMRC. HMRC will then confirm the matter dealt with. It

sounds like HMRC have confirmed this already so if there has been no further interest accrued, without the tax having been paid, then this should be sufficient. Do remember that as PR's

you are expected to report any changes in the future if for example a bank account had been overlooked during the administration of the estate.

So you will need to consider:-

• Whether to prepare a corrective account C4 (IHT and probate valuation amendment)
• CGT declaration if CGT is payable (any increase in value over the amount stated in the IHT forms and beyond the personal allowance on sale of assets)
• Income tax declaration for the period from death to distribution of the estate (interest and dividends from shares and any other income received by the estate during the period of administration, which it looks like you have declared already and HMRC have confirmed but check there is nothing outstanding)

This link is also helpful for an overview:- https://www.moneyadviceservice.org.u...r-someone-dies

HMRC will confirm all outstanding tax issues have been finalised (once they are) but as executors you have a continuing duty to declare anything that comes to light in the future that was not dealt with at the time.

Hopefully that does clarify things if you have any other queries do post again. Hopefully the links provided will help.