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Understanding Tax

Jan 16

2 min read

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As the executor or administrator, one of your key responsibilities is handling the tax obligations of the deceased and the estate. Your solicitor may recommend you speak to a tax advisor due to the specialised nature of estate and inheritance tax. This introductory step outlines your potential obligations; however, you should work with your solicitor, accountant, or tax advisor for detailed tax advice and services as each individual case is different. If the deceased had an accountant or advisor, they may be best positioned to advise on the estate.


Responsibilities

  1. Executor or Administrator: You’re responsible for paying any taxes owed by the deceased or the estate, including income tax, capital gains tax (CGT), and inheritance tax (Capital Acquisitions Tax or CAT). Failing to pay taxes before distributing the estate could make you personally liable.

  2. Beneficiaries: Beneficiaries must pay CAT on their inheritance if it exceeds certain thresholds. They also need to declare and pay any taxes on future income from inherited assets. If you, the executor, are also a beneficiary of the estate, this will apply to you as well.



Estate Taxes

  1. Income Tax: You must file any final income tax returns for the deceased and pay tax on any income the estate earns during probate (e.g., rental income). Your solicitor will work with you to gather the relevant information and they will file the Statement of Affairs form SA.2.

  2. Capital Gains Tax (CGT): If you sell any assets during probate, CGT may be due on any increase in value from the date of death to the date of sale. You can learn more here.



Property and Tax

  1. Capital Acquisitions Tax (CAT): Inherited property counts toward a beneficiary’s overall CAT liability. If the property value pushes them over the tax-free threshold, they will need to pay CAT on the excess. An accountant can assist with calculating an paying CAT owed if any.

  2. Rental Income and Local Property Tax (LPT): If the estate includes rental property, you must declare and pay income tax on rental income during probate. LPT must also be paid, and the new owner will handle future payments. An accountant can assist with these if needed.



The Value of a Tax Advisor

The above is not an exhaustive list. Given the complexity of probate tax, it’s advisable to get help from a tax advisor. They can assist with filing tax returns, calculating taxes, and ensuring compliance to protect you from personal liability. Your solicitor may or may not have the expertise to provide detailed tax advice but can advise on the right time to engage a tax advisor and may be able to refer one.

Disclaimer: Please note that the information provided in this article is for general informational purposes only and should not be construed as financial or legal advice. It is always recommended to consult with a qualified legal professional for advice tailored to your specific situation. No liability whatsoever is accepted by Simple Probate from any action taken in reliance of the information contained on this website.


Jan 16

2 min read

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3

0

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