Income entitlement on appropriation of shares

T’s will leaves 60% of her estate to A, and 40% to B. Her estate includes a portfolio of shares.

A requests the executors to transfer the shares to him in part-settlement of his portion of residue.

The executors appropriate the shares to A, who (for distribution purposes) acquires them at their current value. Who is entitled to the dividends arising on the shares between the date of death and the date of the appropriation?

James Cook
Collyer Bristow

The income would belong to the estate. Assuming that it is dealt with in the same way as the capital, then there would be a 60% payment to A and a 40% payment to B. A has no entitlement to the shares (or the income they generate) until the date of the appropriation.

Taurean Drayak
Elliot, Bond & Banbury

A will only be entitled to those dividends due and payable after the
date of appropriation. If any shares are quoted XD on the date of
appropriation, that dividend will also accrue to residue.

Paul Saunders

In general the price of a share will fall on the XD date by the amount of the dividend. This is logical as this is the date on which the purchaser of the share buys it without entitlement to the forthcoming dividend. On a sale after the XD date the seller still gets the dividend on the payment date, even though he or she no longer owns the shares.

Given that you state that the apportionment of the estate is based on the market value of the shares at the date of appropriation to A, it logically follows that any dividends in respect of which the shares went Ex-Dividend before the date of the appropriation belong to the executors, even if the dividends are not actually received until after the date of appropriation.

Ian McKeever

Ian McKeever & Co Consulting Actuaries.