Estate accounts are one of the final stages in the estate administration process. These accounts are a detailed record of all the financial transactions that have occurred during the administration of an estate.
It includes information on the assets, liabilities, and administration expenses of the estate, and ultimately shows the final amount that will be distributed among the beneficiaries.
Estate accounts are an important part of the estate administration process, as they provide transparency and clarity to all parties involved. In this blog, we will explore what estate accounts are and why they are essential in the estate administration process.
Are estate accounts a legal requirement?
Yes, producing estate accounts is a legal requirement in the UK. Executor(s) (if there is a Will) or Administrator(s) (if there is no Will) are responsible for administering an estate and are required by law to produce a set of estate accounts. The purpose of this is to provide transparency and accountability to all parties involved, including beneficiaries, HM Revenue & Customs, and the Probate Registry. It is important to note that all residuary beneficiaries are legally entitled to be given a full copy of the estate accounts should they request it.
Personal Representatives (the umbrella term for Executors and Administrators) may also ask someone else to represent them, such as a professional estate administration provider like Kings Court Trust.
The estate accounts must be accurate, complete, and be prepared in accordance with the relevant UK laws and regulations. If there is failure to produce estate accounts, this can result in legal penalties and delays in the estate administration process.
What’s included in the estate accounts?
- Summary – a clear and concise overview that lists the essential details, such as the name of the deceased, their date of death, the Will's date (if applicable), the acting Personal Representative's name, the beneficiaries' names, and their corresponding entitlements.
- Assets and liabilities – a detailed breakdown of every asset of the deceased person’s estate such as money, property, and personal possessions. All estate liabilities such as mortgages, credit card debts, and loans need to be included too.
- Inheritance Tax account – this section is important as it determines if the estate is responsible for paying Inheritance Tax, and if so, how much. This information should include any exemptions or reliefs that apply, such as those related to a spouse, charity, the Nil Rate Band, Transferable Nil Rate Band, Residential Nil Rate Band, and Transferable Residential Nil Rate Band.
- Capital account – a detailed account that documents any changes in the estate's value from the date of death. This account should include both overvalued and undervalued assets. For instance, if a property was initially valued at £500,000 but sold for £540,000, the extra £40,000 should be recorded in the capital account.
- Income account – this account should document any income earned from the estate's assets from the date of death until they are transferred or encashed. This includes interest on bank accounts, rental income, and dividends.
- Administration expenses – a clear and detailed breakdown of expenses incurred during estate administration. This should include any fees paid to administer the estate and any disbursements made on behalf of the estate. Disbursements may include Probate Registry fees to obtain the Grant of Representation, property valuation fees, plus many more other related expenses.
- Distribution account – It is essential to prepare a distribution account that clearly states the share of each beneficiary and the final amount payable to them. This account should also list any assets or liabilities that a beneficiary has directly received or paid and adjust them accordingly in the distribution account.
How long does it take to prepare estate accounts?
The time it takes to prepare estate accounts can vary depending on the complexity of the estate, the completeness of records, and any potential complications that may arise during the process.
The Personal Representative must gather and organise all necessary information, complete the calculations, and produce accurate estate accounts; the exact timeframe differs from case to case.
Do all beneficiaries have to approve estate accounts?
All beneficiaries do not need to formally approve estate accounts; however, it is best practice for the Executor(s) and main beneficiaries to sign the estate accounts to show a legal agreement across all parties. Nevertheless, the beneficiaries are entitled to receive a copy of them and review the information.
The accounts should be accurate and comprehensive, and any questions or concerns raised by beneficiaries should be addressed by the Executor(s) or Administrator(s). If a beneficiary disputes any of the information in the accounts, they can seek legal advice or mediation to resolve the issue. However, ultimately, it is the responsibility of the Executor or Administrator to ensure that the accounts are complete and accurate.
Who is entitled to see the estate accounts?
There are not many people within the estate administration process who can view the complete estate accounts except the beneficiaries of the estate, the Executor or Administrator of the estate, and HM Revenue and Customs are typically entitled to see the Estate accounts.
In terms of beneficiaries seeking to see the estate accounts, only residual beneficiaries are able to request a copy of the estate accounts. A residuary beneficiary is a person who is entitled to receive the remaining estate after all debts, taxes, expenses, and specific gifts have been paid out. If the residuary beneficiary requests a copy of the estate accounts and the Personal Representative fails to provide it, the residuary beneficiary can apply for an Inventory and Account Order from the Probate Registry.
The Executor or Administrator is responsible for ensuring that the estate accounts are accurate and complete, while beneficiaries have a right to see how the estate has been managed and distributed.
HM Revenue and Customs may request to see the estate accounts to verify any tax obligations. Other interested parties may also have the right to see the estate accounts, depending on the circumstances.
Kings Court Trust provides award-winning estate administration services to assist families with probate. Our team of probate and tax specialists can assist with obtaining the Grant of Probate, handling tax and legal work, and more.
If you have enquiries about the estate administration process, such as applying for the Grant of Probate, our Client Services Team can be reached at 0300 303 9000 or through the form below.