I’ve taken over a probate file wherein the sole beneficiary is entitled to half of residue when he attains 35 and the other half at 40 (he is currently 31).
I’m just about to wind up the administration and set up the trust but I need to know what to do with the £40K of income that has arisen since date of death (2009).
There are no trustee powers etc in the will so I’m assuming that s31 kicks in and I need to pay the £40K to the beneficiary which I’m sure he will not like receiving in one fell swoop given the tax implications his end!
It depends on the terms of the trust but it sounds likely unless s.31 is excluded - by say an express duty to accumulate.
I’m not aware of any rule that automatically converts the estate to a trust (in which case the beneficiary is liable in the year the income arose). Obviously 9 years is quite a long time but if the administration was truly incomplete until now then the analysis sounds correct.
In the absence of any contrary direction then, yes, the beneficiary would normally be entitled to income from age 18.
Some wills include a trust to accumulate until the beneficiary reaches the specified age. If they fail to satisfy the contingency, the income passes with the default gift.
In the absence of any contrary direction then, yes, the beneficiary would normally be entitled to income from age 18.
Some wills include a trust to accumulate until the beneficiary reaches the specified age. If they fail to satisfy the contingency, the income passes with the default gift.
HMRC Trusts manual (TSEM7655) describes a “conventional basis” for taxing estate income of a beneficiary with a “limited interest” in residue, which involves treating the beneficiary as entitled to the income as it arises, rather than when paid or at the end of the estate administration. Although not statutory, it indicates a willingness by HMRC to accept this basis in most cases.
I have not checked whether your beneficiary is classed as having a limited interest for this purpose. A conventional life interest clearly is a limited interest and I believe an IIP with a contingent interest in capital should also be.
I didn’t know HMRC were prepared to accept a year by year attribution of unpaid income during administration (and agree it sounds like it should apply) but it may be difficult to implement for the 9 year period back to 2009. It would presumably require a very understanding tax inspector.