Gathering the estate assets

[scrumpyjack]

Just to add to my comment not to use a solicitor if you can avoid it. If you do use one, do NOT use a London solicitor. Their charge rates will be hugely high than out of town solicitors!

[AdrianC]

Just to add to my comment not to use a solicitor if you can avoid it. If you do use one, do NOT use a London solicitor. Their charge rates will be hugely high than out of town solicitors!

The solicitor in our case is a midlands country bumpkin working out of an old shop. Palatial it is not. Should have low overheads, at least.

[AdrianC]

No progress to report, but I do have another question if you will all indulge me.

I'm set to inherit some shares in the privately held family business. I want to give these shares to my niece and nephew. I assume this will be a simple Instrument of Variation letter. As far as I know it will not impact IHT, the business having 100% Business Property Relief. I expect the letter will need to specify the value of these shares, so I can't come back later and say I didn't know what I was giving away.

The question: can the valuation be from whatever the business was valued at for probate? Dad died in December 2022. Representation granted September 2023. I'm concerned the solicitor will ask for an up-to-date business valuation, adding yet more delay.

[scrumpyjack]

No progress to report, but I do have another question if you will all indulge me.

I'm set to inherit some shares in the privately held family business. I want to give these shares to my niece and nephew. I assume this will be a simple Instrument of Variation letter. As far as I know it will not impact IHT, the business having 100% Business Property Relief. I expect the letter will need to specify the value of these shares, so I can't come back later and say I didn't know what I was giving away.

The question: can the valuation be from whatever the business was valued at for probate? Dad died in December 2022. Representation granted September 2023. I'm concerned the solicitor will ask for an up-to-date business valuation, adding yet more delay.

The value will be the probate value - there is no alternative. The DOV has to be done within 2 years of death as I recall.
You are 'varying' your entitlement until the Will so they acquire the shares at probate value as at the date of death. The only complication might be if any dividends had been paid on those shares since the date of death. They would not be entitled to those dividends as a DOV cannot be retrospective.
I don't think the DOV needs to specify the value of the shares, it simply varies the entitlements under the Will so the shares go to them. The Will will not have stated a value for the shares!

[AJC5001]

I'm set to inherit some shares in the privately held family business. I want to give these shares to my niece and nephew. I assume this will be a simple Instrument of Variation letter.

How old are they? I thought you had to be over 18, but that isn't the case. It depends on the company articles.
From https://www.1stformations.co.uk/blog/minimum-age-shareholder/

"Shareholder
There is no statutory provision that prohibits a minor (under the age of 18) from owning shares in a UK company. As such, there is no minimum age for a limited company shareholder in the UK, unless the company’s articles impose an age restriction on members.

Whilst less common in small private companies, public companies (PLCs) often exclude minors from being shareholders. In such instances, parents or grandparents may hold shares on their behalf, either as trustees/nominees or by using some form of investment trust."

This seems a fairly comprehensive description.
I didn't know anything about most of it, especially

"Directors’ power to refuse a share transfer
In many companies, the articles of association give directors the power to refuse to register a share transfer. This provision is included in the model articles for private companies limited by shares.

Therefore, even if the articles impose no minimum age requirement for shareholders, the board of directors may not agree to accept a transfer of shares to a child.

Accordingly, you should consult the directors prior to making any such arrangements to gift shares to your child."

I don't know if this also applies to nieces and nephews.

(another) Adrian

[AdrianC]

The value will be the probate value - there is no alternative. The DOV has to be done within 2 years of death as I recall.
You are 'varying' your entitlement until the Will so they acquire the shares at probate value as at the date of death. The only complication might be if any dividends had been paid on those shares since the date of death. They would not be entitled to those dividends as a DOV cannot be retrospective.
I don't think the DOV needs to specify the value of the shares, it simply varies the entitlements under the Will so the shares go to them. The Will will not have stated a value for the shares!

Good points, thanks. No dividends paid, as far as I know. Different classes of shares. Dad didn't need the dividends and his class wasn't getting any.
At this point I don't know the probate value of the shares, but the information I do have gives me a pretty good idea. Not that it matters.

[AdrianC]

How old are they? I thought you had to be over 18, but that isn't the case. It depends on the company articles.

Thanks. They are minors. The company directors are the kids' parents and the idea of giving the shares to the kids was their idea. I've told them they will want to check the company articles. Maybe their accountant/business advisor has all that in hand.

I have looked at the company articles available online, which are very old, and there is boiler-plate language saying "no transfer of shares shall be registered if it is to any minor...". Should be an easy fix since everyone wants this to happen.

[scrumpyjack]

How old are they? I thought you had to be over 18, but that isn't the case. It depends on the company articles.

Thanks. They are minors. The company directors are the kids' parents and the idea of giving the shares to the kids was their idea. I've told them they will want to check the company articles. Maybe their accountant/business advisor has all that in hand.

I have looked at the company articles available online, which are very old, and there is boiler-plate language saying "no transfer of shares shall be registered if it is to any minor...". Should be an easy fix since everyone wants this to happen.

The shares simply need to be registered in the name of an adult (a/c child's initials). This then creates a Bare Trust which must be registered online on the Trust Registration Service (unless such bare trust has already been registered - no need to register additional assets going in to the Bare Trust). They become absolutely entitled at age 18.

[AdrianC]

OP here. No progress that I know of in our case, 8 months after grant of representation (probate). There was a verbal promise, I’m told, from an assistant of the solicitor of “waiting on one more thing” and “have something in 2-3 weeks”. That came and went.

Can I at least be sure that the money is earning interest? The solicitor wouldn’t keep the money in a non-interest-bearing account for 6 months or more, would they? Could they?

[AdrianC]

Well, I do have an update. Apparently, the solicitor's assistant said all the assets have now been gathered, all monies collected. The solicitor now has to file "some paperwork with HMRC", wait to hear back from HMRC, and can then settle the estate. That sounds like more months of delay.

What could that "paperwork" be? The death was December 2022, grant of representation September 2023. Does the estate have to file tax returns for 2022-2023, 2023-2024, and then later 2024-2025? Or could this "paperwork" be a restatement of IHT now that all monies are collected? As usual, I have no details.

[scrumpyjack]

The trouble with 'asking for details' is that every time you contact the solicitor, they rack up more 'chargeable hours' and bill the estate more.

This is yet another reason why I would never ever appoint a solicitor as executor, except in the last resort when you have no competent reliable relatives!

[JonE]

Can I at least be sure that the money is earning interest? The solicitor wouldn’t keep the money in a non-interest-bearing account for 6 months or more, would they? Could they?

Only just spotted this but my understanding is that solicitors are, understandably, very restricted by SRA in how they are permitted to handle client funds and the banks are very well aware of this. Client accounts do not need to offer generous interest rates as solicitors don't have total freedom to place the funds elsewhere. Inevitably, interest rates available to a captive market do not need to compete with those available to the open market. This may be relevant:
https://www.lloydsbank.com/business/ret ... rates.html

The fact that interest on client accounts (even an account specific to a single client) can be paid directly to a legal practice's own 'office account' suggests that solicitors may not need to fully account to their clients for interest received on client funds - but that's just supposition on my part.

Cheers!

[AdrianC]

Thanks. Lloyds would be 1.85% interest. Not great when I could be getting 5% if the money was distributed.

Did some research. Unless the solicitor made a mistake the IHT paid should be good. I expect all they have to do is the estate income tax returns. It might qualify as a 'simple' estate, depending on how the investments did before the solicitor got the money:

https://www.gov.uk/probate-estate/reporting-the-estate
Reporting on ‘simple’ estates
Report tax owed in the administration period simply by writing to HMRC (known as ‘informal arrangements’) if all of the following apply:

the estate was valued at less than £2.5 million when the person died
the total Income Tax and Capital Gains Tax due is less than £10,000
you did not sell more than £500,000 worth of assets in any single tax year during the administration period
To report the estate send a letter to HMRC at the end of the administration period

What I don't understand is why this will delay the distribution. Can't they (the solicitor's office) work out the estimated tax, keep that amount back, plus 50% (say), take out their fees, and distribute the rest? I'd have it done on Monday.

[AdrianC]

Re 'simple' estate: "you did not sell more than £500,000 worth of assets in any single tax year during the administration period" - I realized this is anything that might have a capital gain, not just hard assets. It includes investments, and even ISAs.

https://www.gov.uk/hmrc-internal-manual ... l/tsem7410
the proceeds of assets, whether those assets are chargeable or not ,sold in any one tax year are less than £500,000 for deaths on or after 6 April 2016.

[Clitheroekid]

Can I at least be sure that the money is earning interest? The solicitor wouldn’t keep the money in a non-interest-bearing account for 6 months or more, would they? Could they?

Only just spotted this but my understanding is that solicitors are, understandably, very restricted by SRA in how they are permitted to handle client funds and the banks are very well aware of this. Client accounts do not need to offer generous interest rates as solicitors don't have total freedom to place the funds elsewhere. Inevitably, interest rates available to a captive market do not need to compete with those available to the open market. This may be relevant:
https://www.lloydsbank.com/business/ret ... rates.html

There aren't actually any restrictions at all imposed by the SRA on where a client account can be held, other than it has to be with a UK institution. Such restrictions as exist are imposed by the institutions themselves.

It's possible to get 3% on an instant access client account, which ain't bad. But you can get 4.5% on a 90 day account, and in a probate case such as you're talking about, some solicitors might well take the view that the beneficiaries can be made to wait 90 days or more without complaining unduly, so that it would be quite feasible to park their cash in such an account and rake in the interest.

The fact that interest on client accounts (even an account specific to a single client) can be paid directly to a legal practice's own 'office account' suggests that solicitors may not need to fully account to their clients for interest received on client funds - but that's just supposition on my part.

You're quite right - solicitors do not have to account to their clients for all of the interest earned on a client's money. The rules used to say that if the interest was more than £20 it had to be paid to the client, which was an absurdly low sum - the cost of doing the calculation and making the payment was far more than £20 - but that rule was scrapped in 2019, and replaced with a requirement that a `fair' amount of interest should be paid.

This is typical of the SRA, in that they make stupidly vague rules that no solicitors understand, and then impose sanctions at random when they think a solicitor has broken the rule.

And their `guidance' is about as much use as a chocolate teapot - https://www.sra.org.uk/sra/news/sra-upd ... est-rates/

[AdrianC]

It's possible to get 3% on an instant access client account, which ain't bad. But you can get 4.5% on a 90 day account, and in a probate case such as you're talking about, some solicitors might well take the view that the beneficiaries can be made to wait 90 days or more without complaining unduly, so that it would be quite feasible to park their cash in such an account and rake in the interest.

Our solicitor could be netting a few k a month in interest. They've been collecting the money since last October, and I'm pretty sure they've held nearly all of it since March, or before.

I'm not the executor. The solicitor does not respond to emails from the executor. He has called in to the office a few times and gets to talk to an assistant, who fobs him off with "waiting on one more thing" or the latest one "waiting on HMRC". Clearly, he needs to make an official appointment with the solicitor herself and find out what's going on.

Sigh. It's tricky. One doesn't want to be seen as grasping for the money, or telling the executor how they should be handling it, in effect telling them they're doing a bad job of it.

[Lootman]

I'm not the executor. The solicitor does not respond to emails from the executor. He has called in to the office a few times and gets to talk to an assistant, who fobs him off with "waiting on one more thing" or the latest one "waiting on HMRC". Clearly, he needs to make an official appointment with the solicitor herself and find out what's going on.

Decades ago I was having similar problems with a solicitor, although about a conveyance and not probate.

I was getting nowhere with the guy and my wife came up with a brilliant suggestion. She would go and see him and (unannounced) take our kids (5 and 3 at the time, if memory serves) along with her. The idea was that she would not make too much effort to keep them under control.

I was not there so cannot describe in detail, although I wish I had been. But apparently she left with everything we wanted and had been waiting for, and with his office only partly rearranged and in need of a clean.

Maybe people with kids that age should rent them out as expediters?

[scrumpyjack]

There is nothing to prevent an interim distribution being made to the beneficiaries and it is quite normal practice. Perhaps the executor should instruct the solicitor to do that.

[Clitheroekid]

Sigh. It's tricky. One doesn't want to be seen as grasping for the money, or telling the executor how they should be handling it, in effect telling them they're doing a bad job of it.

Perhaps it might be a good idea to speak to the executor and tell them that you need an estimate from the solicitor of the interest you're to receive on your share of the residue for tax-planning purposes!