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Any income generated by the estate is liable to income tax from the date of death until the estate is fully administered. This includes the entirety of income at the basic rate with no personal allowance. However, income tax may not be relevant in the event when all tax is paid net on the income.
Shares may be liable for capital gains tax but the administrators/executors do get the same capital gains tax exemption as any other individual. Meaning anything under £11,100 will not be taxed. The per cent of which gains in an estate are taxed is 28%. So it is worthwhile for the administrator/executor to meet with the beneficiaries to discuss options of using their capital gains exemptions. If it is confusing you should ask a professional for advice.
Administrators/executors will should then inform the Tax inspector (HMRC) of the death, once this has been done the inspector could potentially send out a Form R27. This form asks for information on who will receive the residue of the estate or if there are any trusts that will remain after the wind up of the estate. It also asks the Administrator’s/executors.
If there will be any untaxed income or capital gains. After they have received this form back they will assess what happens next whether that is a tax repayment or further assessment of the deceased.
The Administrator’s/executors should also provide a Form R185 to the beneficiaries who are entitled to the residue estate. This form presents how much gross income has been generated by the estate during the tax year and the tax paid by the Administrator’s/executors
If the residue isn’t held in trust, the income that comes in is classed as the beneficiaries. He can state this on any tax returns and attach the R185 to prove tax has been paid on it. If, however, the beneficiary isn’t a tax payer then he/she can claim this tax back. On the other hand the beneficiary could be a higher rate tax payer which means he/she could be made to pay additional tax
All records that have been kept and updated since death should now be pooled together and organised in an easy to read format for the beneficiaries. Administrator/executor’s at this point should know that any residue estate should be held for, not legally, 6 months. This is because any family member who feels like they have been not been properly included in the distribution can make a claim. If a claim is made the administrator/executor’s should seek professional help.
After all of the residual beneficiaries or those relatives entitled to something through intestacy laws have signed the accounts, the estate is now finished. Anything left in the estate should be handed out to those who are stated in the will or to those under intestacy laws.
Paperwork regarding the distribution and everything else should be kept on file for a minimum of 12 years after all distribution is complete. Any beneficiaries who have been left a life interest or the will created an on-going trust for, should keep the paper work for 12 years after the final distribution to whoever inherits after the death of the last person with a life interest.