Estate accounts - grossing up

(Samina Aslam ) #1

Hi

I am in the process of finalising the estate accounts for an estate where the testator divided her residuary estate equally between 5 individuals and 4 charities and specified that after the IHT is paid all beneficiaries are to receive the same amount.

The IHT of course must be paid from the non-exempt beneficiaries shares. I should be grateful if anyone can please share a precedent of the distribution page of a estate accounts setting out the calculation and the format to demonstrate this, including grossing up.

Thank you

Samina Aslam
Oliver Fisher

(Maxine Higgins) #2

If you are finalising the estate accounts then presumably you must have already done the calculation in order to work out what the IHT was in the first place and obtain probate so it is just a case of reflecting the numbers - or have I totally misunderstood the question?

The distribution page template will depend on which accounting software you are using, or if you are doing manually typed accounts, and could be either vertical or horizontal according to your preference/software constraints. Working back up the page, the net residuary Estate after IHT and everything else would be equally divisible by 9.

Then the IHT would be divisible by 5 and ‘added’ to the ‘net’ amount of the relevant individuals (for presentation only since it will have already been deducted earlier) and that will give you the grossed up shares for each type of beneficiary.

Maxine Higgins
Citroen Wells

(mullenky) #3

Like Maxine, I am not sure precisely what it is that you, Samina, wish to achieve.

However, you may wish to consider constructing your Distribution account including 4 columns ie Narrative, Gross, IHT and Net.

Balance brought forward from Accounts shown under Net column [and so also Gross]

Add back IHT [&interest] under IHT, with total carried to Gross.

Total

For each individual beneficiary then show “Notional” grossed-up legacy [under Gross column] less IHT [& interest] attributable [as negative under IHT column] leaving net legacy under Net column [which should then be one-ninth].

For each charitable beneficiary simply show Net legacy under both Gross and Net columns [being the same figure which should also be one-ninth].

All three columns should then total Nil.

However, the IHT liability was based on values at date of death [and may be affected by other factors such as IV gifts and/or associated trusts], whereas the final estate accounts should include administration costs and expenses; capital gains and losses and administration income. So the “adjusted” accounts may give a lay beneficiary an idea yet he/she may still need some narrative explanation as to how the tax was actually calculated.

Kevin Mullen