I am dealing with an estate where the Executors’ year expired on 17 April 2017. Unfortunately, the sale of the property fell through twice, before it eventually completed today. What was the rate of interest payable on the outstanding legacy during this period (presumably it changed with the recent BoE base rate increased)?
Thank you in advance.
Martyn Dixon
Harold Bell & Co
The basic account rate at the court funds office is payable on gifts of cash, 0.3% up to 5 June 2016 and .1% from 6 June 2016. you will need to check if it has changed since 6.6.16 to date.
Simon Northcott
The will leaves a legacy subject to IHT. The executor’s year has past, the IHT has been paid. I now need to calculate the interest due on the legacy. Do I calculate it on the gross or net amount?
Interest is payable on the amount that the beneficiary is due to receive. If the legacy is £1,000, then that it the amount the interest is calculated by reference to (even if for IHT purposes the legacy has been grossed up at 40%).
If a legacy is paid by instalments, it is first applied in settlement of any interest due, before satisfying the amount of the legacy. If, say, there is a legacy of £1,000 to which interest of £10 has accrued. If the £1,000 is paid and a subsequent payment is made on account of the interest, the executor will need to work on the basis that the first payment of £1,000 included the £10 interest, so that until the final payment is made, interest will continue to accrue on the “unpaid” £10.
Paul Saunders FCIB TEP
Independent Trust Consultant
Providing support and advice to fellow professionals
Thank you very much, v helpful
Paul
Sorry- I realise I am still confused - the legacy in the will is #100k but after tax the legatee will receive #60k - which figure should I calculate the interest on?
Interest is due on the amount that the beneficiary is due to receive.
If the legacy is payable “subject to inheritance tax”, then the amount the beneficiary is due to receive is the net amount after payment of the appropriate IHT (including any interest accrued and due on the IHT).
Paul Saunders FCIB TEP
Independent Trust Consultant
Providing support and advice to fellow professionals
Martyn can you clarify whether the legacy you’re talking about is a legacy of a property (A bequest’) or a legacy of money. If it was a bequest then no interest is payable. If it was a legacy of money and the sale proceeds of the property were needed to pay it, was the legacy given subject to inheritance tax or was it given free of inheritance tax. If it was subject to inheritance tax, which is unusual, then the interest payable is on the net amount of the legacy after tax. If it was given free of inheritance tax then the interest is payable on the full amount of the legacy.
Patrick Moroney
Thanks again Paul. It was a legacy of money (in answer to Patrick’s comments).
hopefully this is helpful
Since 2 December 2002 the court funds office basic account rate has been applied where there are pecuniary legacies (gifts of money) under a will that are not paid within one year of the testator’s death (unless stated otherwise in the will or in a court order).
Court Funds Office Rates Basic account rate
On or after 1 June 2020 to payment date (check if new rate been set) 0.05%
On or after 6 June 2016 but before 1 June 2020 0.10%
On or after 1 July 2009 but before 6 June 2016 0.30%
On or after 1 June 2009 but before 1 July 2009 1.00%
On or after 1 February 2009 but before 1 June 2009 2.00%
On or after 2 February 2002 but before 1 February 2009 4.00%
kind regards