I am instructed with an Estate where the Will provides a Specific Gift of Property. It states in the Will: -
I give free of tax all my share or interest or whatever proportion nature or amount in my property known as X to my Trustees to hold upon trust to divided it or treat it as being divided into 100 equal shares and distributed to XYZ in their shares.
The gift is also given free of any mortgage or adverse interest and any charge or other security shall be paid from the residue of estate together with any costs of discharging the security.
The Property does not have a mortgage and is free of charge.
The Property has increased in value since the date of death and there is now a CGT liability, as well as Council Tax and buildings insurance and some building repair liabilities.
Who is responsible for these costs? Will it be from the sale proceeds as these are specific to the gift or from the residuary estate. Can any advise or point me in the direction where I may find a definitive answer.
These are not admin expenses. So the admin period seems to have ended. An executor in this position is entitled to transfer equitable and legal title to the legatees by an assent whether they like it or not and they have to get on with it.
If any of XYZ is a minor that might be a complication re the legal title if they have to remain bare trustees of it alone. If XYZ or some of them is a minor they may not be then able to retire save by going to Court. In theory they could sell the property if XYZ agree (a minor also a complication) but then they will be saddled with whether they got the right price and such malarkey.
The costs of maintaining the property post death fall on those entitled to the property, unless the will provides otherwise (which would be unusual)
That the gift is made “free of any mortgage or adverse interest and any charge or other security shall be paid from the residue of estate together with any costs of discharging the security” does not change this as such costs in question do not come within any of the categories identified.
It would therefore be reasonable to deduct all such costs before distributing the balance of the sale proceeds to the beneficiaries entitled.
Consideration might be given to appropriating the property before the sale to the beneficiaries as, if it is residential property, they will be liable to CGT at a lower rate than PRs (and also so that they might use their personal annual CGT exemption to reduce the overall CGT charge).
Paul Saunders FCIB TEP
Independent Trust Consultant
Providing support and advice to fellow professionals