Appropriation of Investment in an Estate

Can you tell me what the situation is when you do not appropriate an investment with shares to the residuary beneficiaries and then you receive quite a gain when it is cashed in, who will pay the CGT when some of the residuary beneficiaries are charities and some not.

Lisa Nurse
Graham and Rosen

In the absence of an effective appropriation to the beneficiaries, the personal representatives are liable for CGT (if any) on the gain.

Personal representatives have the equivalent of an individual’s annual CGT allowance for the year of death and the following 2 tax years. If the deceased died on 1 January 2014, the estate would have the allowance for the tax years 2013/14, 2014/15 and 2015/16, but would have no allowance for the tax year 2016/17 or any subsequent year.

If, at the time the investment was “cashed in” the administration of the estate had been concluded, but for the distribution of the (remaining) assets, it could be argued that the asset was not at that time held by the personal representative(s) in that capacity, but effectively on bare trust for the residuary beneficiaries, so that the gain would be assessable upon the beneficiaries in proportion to their entitlements. However, whether or not the administration was concluded at the relevant time will be a question of fact, depending upon the circumstances.

Paul Saunders

Just to confirm Paul Saunders’ final paragraph, a colleague recently had a case where we managed to persuade HMRC that “residue had been ascertained” and that, having reserved cash for the expenses, the remaining assets were then held as bare trustee for the residuary beneficiaries and then sold on their behalf. You will probably need to show that sufficient cash was held to cover expenses prior to the sale and it would help if payments on account had already been made. The position would still need to be cleared with HMRC though.

Graeme Lindop
Coles Miller Solicitors LLP