When someone dies, one of the first steps for the personal representatives is to establish what assets and liabilities are within the deceased person’s estate. It is good practice to prepare a schedule of these assets and liabilities and their values.
Assets & liabilities
When it comes to reporting this information to HM Revenue & Customs and/ or the Probate Registry, the values should be reported as they were on the date of death. For example, for any bank accounts held by the deceased the value that will be reported in the probate application is the capital balance of the account at the end of the day of the date of death, plus the amount of any accrued interest that would have been paid if the account was closed on that day. If the deceased owned a property, then a valuation should be obtained based on what price the property might have been expected to achieve if it was sold on the open market at the date of death. Similar balance information and valuations should be obtained for all solely and jointly owned assets and liabilities.
Under the Administration of Estates Act 1925, personal representatives have a duty to provide a full inventory of the estate and account of the administration of the estate.
During the course of the estate administration, personal representatives should keep a set of estate accounts which show any money coming into or out of the deceased person’s estate. The schedule of assets and liabilities will act as the starting point, and then the estate accounts should cover all post death transactions.
In terms of money coming into the estate, this will include things like any interest earned on bank accounts or investments, dividends paid on investments, any transactions coming into the deceased’s bank accounts before they were frozen, any pension payments that were due but were unable to be paid because the accounts were frozen and so on. The estate accounts will contain an income schedule showing all income earned during the administration period and this will be used to assist with any income tax reporting.
In respect of money being paid out of the estate, this will include things like any money paid out of the deceased’s bank accounts before they were frozen, valuation fees, utility bills, insurance premiums, legal fees and other administration expenses.
Why are estate accounts important?
The estate accounts should show a clear story of how and why the value of the estate has changed since the date of death. The estate accounts will also reflect any changes made such as by Deed of Variation.
The final value of the estate, once the administration has been completed, is what will be distributed to the residuary beneficiaries. The residuary beneficiaries are entitled to receive a full set of estate accounts prepared by the personal representatives so that they can see why they have received the exact amount distributed to them. The estate accounts should be approved by the residuary beneficiaries, and any queries answered, before the estate is distributed.Some estate accounts, like some estates, may be straightforward, whilst others will be complex. In particular, if there are large share portfolios in the estate these can be complicated to reconcile. We can assist you with the estate administration and the preparation of a detailed, yet easy to follow, set of estate accounts.
How can Moore Barlow help?
We take time to understand your requirements, enabling us to offer you bespoke advice. With a team of specialists in tax, wealth management, estate planning and rural services our wide-ranging expertise enables us to provide you with practical solutions tailored to your and your family’s needs.
Contact our wills, trusts and estates team team now.