Good afternoon,
Finalising figures for the IHT 400 - client died in May this year. easyJet announced a rights issue and sent it to shareholders in September - three and a half months after date of death. Because the executors did not take it up easyJet have now sent a cheque for £3.5k. I’m unclear whether this should be included as an asset of the deceased’s estate for IHT purposes? Please advise.
IHTM18100 - Stocks and shares: valuation: rights issues
"If the shares are marked XRts at the date of death, and the ‘new’ shares were purchased, ensure that the deceased’s estate includes the ‘new’ shares, with a deduction for the purchase price if this was not paid until after the date of death.
If the ‘rights’ were sold, ensure that the proceeds of sale are included in the estate."
So it will depend on whether the rights issue was formally announced prior to death.
The Rights Issue documents will have an operative date. If that is after the date of death you don’t include it as an asset held by the deceased at the date of death for IHT purposes – instead it is a capital appreciation by the estate, either as capital or income earned by the estate. Read the small print to see how it should be treated for tax.
The record date for the Easy Jet rights issue was 8 September 2021.
Accordingly, it is only for deaths on or after that date that the rights would reflect in the IHT 400.
In the case in question, the sale of the rights will be a part disposal of the shares for CGT purposes.
Paul Saunders FCIB TEP
Independent Trust Consultant
Providing support and advice to fellow professionals