The law on Capital Gains Tax (CGT) during Estate administration is often misunderstood. In many ways, the position between sales by living persons and by executors are similar but are often subtly but importantly different. They can easily catch you out!

Many non-professional Executors believe that CGT is based on the price at which the deceased bought an asset. This can make people concerned when the deceased bought their house many decades ago and it has increased in value several times over.

However, there is a free uplift of CGT on death to the date of death value. This means that when the Executors sell an asset, they only need to look at the difference in value between the date of death and the date of sale.

When someone sells their main residence during their lifetime, they can usually claim Principal Private Residence Relief (PPRR). This means that any increase in value since the purchase is not taken into account when they calculate the gains on the rest of their asset sales from that tax year.

The position on death is different. PPRR is only available for Executors when the house was the main residence of at least one individual immediately before and immediately after the death. The individual(s) must also be entitled to at least 75% of the sale proceeds, whether from the Will or otherwise. In practice, therefore, PPRR will only be available on death when the deceased was living with someone else.

Where PPRR is not available, Executors must submit a provisional return of the estimated gain and pay any tax due within 60 days of completion.

As with sales during lifetime, the Estate can deduct the incidental expenses incurred in selling an asset, such as mortgage redemption, estate agent’s fees, broker fees and conveyancing fees. This ensures that it is only the net gain that is taxable.

In addition, if you have solicitors acting in the Estate administration, you can deduct a portion of their fees. These are calculated in different ways depending on the value of the asset.

The annual exempt amount for estates is the same as for living individuals, and double the amount for most types of trusts. As of tax year 2024/25 it is £3,000, which is much lower than in previous tax years.

The exemption is only available in the tax year containing the date of death and the two immediately thereafter. If there are assets that have still not been sold after that, the exemption is lost!

This can be a powerful way to wash out a large capital gain in Estates which have multiple beneficiaries.

The basic position is that the Estate only has one CGT annual exemption. This amount is much lower than it has been in previous tax years. If assets have sold for much more than this, there could be a substantial tax bill.

To alleviate this, the Executors can choose to “appropriate” the asset before it is sold: this means that instead of being sold by the Estate, it is treated as if it were sold by the beneficiaries. As a result, all the beneficiaries can use their own CGT allowances and the Estate can still use its own one. Therefore, in an Estate with three residuary beneficiaries, the gain can be split across four CGT allowances, i.e. one for each beneficiary plus one for the estate!

Depending on the circumstances, the executors may need to file a tax return. This includes Estates in which any of the following conditions apply:

• The total sale proceeds are more than 4 times the annual allowance
• The will contains a trust
• The total income tax and CGT liability for the administration period is over £10,000
• The probate value of the Estate is over £2.5 million
• The Executors sold assets in any one tax year for more than £500,000 (or £250,000 where the date of death was before 6 April 2016)

If none of these applies, the Executors may be able to make an informal payment to HMRC for the whole administration period.

Capital gains tax for Executors can be a minefield with all of its quirks and differences compared to how living individuals are treated. It is therefore essential for Executors to take proper advice on the CGT implications of a proposed sale, especially where the value has increased substantially since the date of death.

For further advice and assistance please contact our Wills, Trusts and Probate team on 01604 828282 / 01908 660966 or email info@franklins-sols.co.uk.

If you have children under the age of 18 years, your Will needs to set out what will happen to them if you die before they turn 18 as well as who is responsible for looking after anything you leave them.

For our purposes there are three roles that matter: executors, trustees and guardians. These can all be filled by the same people but the responsibilities of each are different.

Your executors are responsible for the financial aspects of your estate: applying for probate, closing down bank accounts, paying any liabilities and distributing the rest to the beneficiaries in accordance with your Will. Your executors will also be the trustees of any Trust included in your Will, which we expand on below.

Your guardians are responsible for looking after your children day to day.

In the vast majority of cases, a guardian can only be appointed by a person with parental responsibility or by someone who themselves has already been appointed as a guardian.

If a child’s parents are married or in a civil partnership when the child is born, both parents automatically have parental responsibility. If not, the mother still does automatically, but the father would only have it in certain circumstances, e.g. if he is named on the birth certificate or he goes on to marry the mother.

We would strongly suggest including a clause in your Will in which you appoint guardians for your minor children. This appointment would take effect when both parents have died and would last until the child’s 18^th birthday.

For practical purposes, it is best if both parents appoint the same guardians in their respective Wills.

The position is more complicated where there are stepparents; in that case we would highly recommend discussing this with us at a meeting.

As mentioned above, when a minor inherits someone’s Estate, it must be held on Trust for them until they are at least 18.

For a Trust to work properly, there need to be at least 2 trustees so this is the minimum number you should appoint. It is possible to appoint just one, but then that person would need to appoint a second trustee to act alongside them. This may not be someone you approve of, so if you want to retain some control you should appoint at least two executors/trustees.

You may not want your children to become absolutely entitled to their share of your Estate the moment they turn 18. Other common ages you can specify are 21 and 25, because there are often inheritance tax benefits to Trusts where the children are entitled to their share before they turn 25. Ultimately, though, it is entirely up to you. Whichever age you choose, your trustees will still be able to let them have some of the money before then, if e.g. they need it for school fees or private medical care.

That said, there are several other types of Trusts available, and we would be more than happy to discuss these with you to find the one that best suits your aims.

For further advice and assistance please contact our Wills, Trusts and Probate team on 01604 828282 / 01908 660966 or email info@franklins-sols.co.uk.