Requirement for estate accounts

By Tolley

The following Trusts and Inheritance Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

Requirement for estate accounts
Duty to prepare estate accounts
The purpose of estate accounts
A Reconciliation process
Timing of Estate accounts

Duty to prepare estate accounts

The Personal Representatives' (PRs) legal obligation to prepare accounts is set out in Section 25 of the Administration of Estates Act 1925. Their prescribed duties include:

when required to do so by the Court, exhibit on oath in the Court a full inventory of the estate and when so required render an account of the administration of the estate to the Court.

And indeed that obligation is repeated in every sworn oath leading to a grant of representation.

However, the law does not provide any further guidance as to how the duty is to be fulfilled. There are no statutory requirements as to the format of the estate accounts or the degree of detail. Consequently, PRs or their accountants may choose a presentation which best suits the circumstances. Advice as to layout and content is given in STEP Accounting Guidelines.

Who are the accounts for?

Primarily, the estate accounts are intended to be the PRs' account to the beneficiaries of the estate. All residuary beneficiaries are entitled to see the accounts. Legatees are not, (unless their legacies cannot be paid in full.) Where professional advisers are acting, they will prepare accounts for the PRs' approval, and they will be subsequently distributed to the residuary beneficiaries

There is no requirement to file estate accounts with a government agency. The initial valuation of the estate at death is provided to HMRC, where inheritance tax is payable, and to the Probate Registry to obtain the Grant. HMRC must be informed of any changes to the date of death valuation in a taxable estate, but the progress of administration in the form of full accounts is not reported.

The purpose of estate accounts

Ultimately, estate accounts are prepared to show the beneficiaries and lay executors what has