Dealing with the tax compliance for admin period. There are pecuniary legacies of a couple of rental properties to legatees and am aware that the rents since death will flow through to these legatee as not part of residue. There are 2 residuary beneficiaries 50:50. There is interest, dividends and rents (on other non legacy properties) in respect of the residuary assets. One beneficiary is receiving his 50% residue via an appointment of rental properties and shares whereas the other is receiving his 50% entitlement via the appointment of the main residence (non income producing) and cash. When completing the R185E I assume one allocates the income according to how their share was satisfied i.e. beneficiary 2 wont be taxed on the rents and divs as he didnt get those assets or is it a 50:50 income division due to the absolute residuary 50:50 entitlement?
The appropriation to the residuary beneficiaries only carries with it the income from the date of appropriation. Any income pre-appropriation falls into the general residuary pot and is divisible between the beneficiaries in accordance with their shares of residue.
Accordingly, in the case in point the beneficiaries will be entitled to the pre-appropriation income 50:50 and should receive R185Es to that effect. It is only the post-appropriation income that will be due to the individual beneficiary to whom an asset is appropriated.
Paul Saunders FCIB TEP
Independent Trust Consultant
Providing support and advice to fellow professionals
Thanks Paul that’s really helpful, There is a substantial chargeable event gain too (arose in the tax year after death) and so the c/e gain falls to the beneficiaries. I had initially thought 50:50 split of all income but then it seemed harsh to tax the recipient of the main residence on substantial income when he
hasn’t actually received any income but all examples I could find just illustrate equal division of assets.
Hi Gbr,
Each beneficiary in your case should be receiving 50% of the capital and 50% of the income of the residue of the estate. The fact that one beneficiaries’ entitlement is being satisfied by the main residence (a non-income producing asset) does not change that he is receiving value which is/should be equal to both the capital and income that he is due from the estate, so it is fair that he is taxed on this.
Kind regards
Kat