Unadministered estate and PPR

Dear forum members

We have varying views among the solicitors in our firm about the following scenario:

H died intestate in 1999. In 2019 his wife went into care and a partner in the firm was appointed her deputy. He discovered that H’s estate had never been administered and that H had been the sole owner of the property occupied by H&W and then just W following H’s death. The property was sold by H’s administrators within a month of W going into care. W is the sole beneficiary under intestacy.

The value of the property on H’s death was £65,000 but the property sold in February 2019 for £220,000. The question is whether the administrators need to make a PPR Relief claim because the property had never been transferred to W and was sold by the administrators.

Your guidance would be very much appreciated.
Thank you

Lorna Sansom
Blandy & Blandy LLP

I take it that the property was never formally appropriated to the widow.

Whilst the widow may have been the sole beneficiary, based on the values as at the date of death, if the property was never formally appropriated to her the estate will need to be re-valued for distribution purposes now that the property has been sold This may let in H’s children or other relatives to the class of beneficiaries. At the date of H’s death, the statutory legacy was £125,000 where he also left issue and £200,000 where he left no issue. Although interest will have accrued on the statutory legacy, this may not be sufficient to absorb the increase in value within the estate. Whilst current values will need to be used when making any distribution, the class of beneficiaries will be identified by reference to those living as at the date of death.

If the property was sold by the administrators and the widow had an entitlement to at least 75% of the proceeds of sale (at the time of the sale), the administrators should consider claiming relief under s.225A Taxation of Chargeable Gains Act 1992.

In the absence of any such claim, the administrators may be liable to CGT on the full gain, unless they can persuade HMRC that by the time of sale they were effectively holding as bear trustee only. However, if the widow is not the only person now entitled under the intestacy, this could be seen as an attempt to deprive the further beneficiaries of any entitlement.

Paul Saunders