The residuary estate is whatever is left after the tax authorities, creditors and beneficiaries receive payment.
I.T.G.probate valuations reminds you not to forget to deduct the expenses that you incurred as an executor from the residuary estate. You’re not allowed to deduct any payment for your services, but hopefully the person making the will was kind enough to leave a little gift as a thank you for all your hard work.
Three things may happen to the residuary estate:
The testator may have said in their will what should happen to the residuary estate. If so, tot up how much is left after everything else has been paid from the estate, and arrange for payment to go to the named beneficiary.
The testator may leave the residue to meet the estate’s tax liability. For example, the residuary estate can be used to pay back a loan taken out to pay inheritance tax prior to grant of probate.
The testator may have forgotten about the residuary estate. If this is the case, they are deemed to have died partly intestate. You must distribute this portion of the estate according to the laws of intestacy.
Send the beneficiary or beneficiaries of the estate a completed copy of Form R185 from HMRC. This form shows the income that the residuary estate earned during the year and any tax paid on that income.
Producing the Final Accounts
Your final job as an executor or administrator is to produce the estate accounts for the main beneficiaries. If you’ve been thorough during the probate process and kept all the paperwork tight, this should be a simple task.
The accounts should be set out clearly with the following information:
All taxes paid. In the case of inheritance tax, this means keeping a copy of Form IHT30 showing that no more IHT is due.
All creditors accounts settled. You should have receipts from the creditors.
All beneficiaries receiving a gift. You should have got all the beneficiaries to sign a receipt for their gift.
All testamentary expenses. In short, every penny you spent as an executor or administrator should be accounted for, from postage stamps to the paying of solicitor’s fees.
Once you have drawn up your accounts, send all the beneficiaries a copy. The beneficiaries should indicate that they are happy with the way in which these accounts are set out.
Her Majesty’s Revenue & Customs (HMRC) may request a copy of the estate account for their files.
A copy of the estate accounts must be kept for 12 years after probate.