Family Company Shares on Death

Trusts Discussion
1

Two separate but related queries:

  1. Is there any reason why a post-death severance of a jointly held shareholding (husband and wife) would not be effective for tax purposes? (Subject to the same being done within two years of death, of course)? I don’t think it is an issue, but a professional colleague does not think that it will work.

  2. Family company - the only asset that would require a grant is a shareholding in the company X Ltd. The directors and all other shareholders are members of the family, and there is no dispute over the terms of the Will that T’s share pass to the spouse. Need a grant be obtained solely for this? IHT is not going to be an issue because BPR would apply.

Many thanks
Damian Lines
Rubin Lewis O’Brien

2 
  1.  There is no obvious reason why the surviving joint holder should not make a personal gift of a half of the formerly joint shareholding and dress it up by way of variation so that the gift is deemed to have been made by the deceased for IHT purposes.

  2.  Looking at it from the company’s viewpoint, the directors should be advised as to the legal position and the immediate consequences of not requiring a grant before registering a transfer in favour of the widow.  How will the costs compare to those of obtaining probate.  Looking forwards, others might take this as a precedent and insist that on subsequent deaths a deceased shareholder’s shares should be dealt with without a grant.  This could be storing up issues for the future, as one cannot be certain the same fact pattern will apply on the deaths of other shareholders.  Personally, if I were one of the directors, I would prefer to proceed with the benefit of a grant.

Paul Saunders

3

  1. IHTA 1984 s142 (ie execution of a DoV) is “back-dated” for IHT and CGT but not for income tax. Post death severance of a jointly held beneficial interest is possible for tax purposes.
    There has recently on the TDF been an extended discussion on this matter.

  2. Strictly speaking no grant is necessary. Executors’ authority is derived from the will itself and not the grant and hence the executors may act in the absence of probate. The reason for probate in most cases is that third parties (e.g. banks in particular) before releasing assets to the executors will require proof of the executors’ authority and implicitly the validity of the will. In the circumstances you describe probate need not be obtained (I assume no reference is made in the company’s Articles of Association in this regard). However, without probate the validity of the will as to its terms and execution will not have been confirmed.

Malcolm Finney