Correct Ex-Div Dividend re IIP Trust "Probate" Val

Should Solicitor use Stockbroker Dividend Value or Actual Banked Dividend received after Termination

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I will use an exaggerated illustration to understand this problem.

Life interest trust comes to an end on death of life tenant on 31 December 2019. Life interest trust held 100 million shares in XYZ Plc.

The shares went ex-div shortly before death, and the stockbroker prepared an official "probate" value for the quoted shares. This showed they were worth £100 per share at death, and the published dividend rate, payable 15 January 2020, was 499.99 pence per share.

So, the stockbroker's valuation revealed the shares were worth 10 billion pounds at death, plus the ex-dividend dividend of £499,990,000.

However, for payment purposes, the company secretary decided to round the dividend to £5 per share, which is £500,000,000. In other words, an extra £10,000 was paid into the bank account on 15 January 2020.

The solicitor has decided to prepare bare trust accounts from 1 January 2020 until the date the bare trust comes to an end, when the beneficiaries are paid out. The main reason is that the beneficiaries are highly contentious and it is likely there may be an argument if they spot any discrepancies etc.

The solicitor's draft bare trust accounts reveal the starting point to be a death value of £10 billion plus the ex-div dividend of £499,990,000. So there is going to be a discrepancy of £10,000 because £10,000 extra cash has reached the bank account.

The IHT at stake is only £4,000 (£10,000 at 40%). My question is, should the solicitor use the smaller "official" valuation from the stockbroker for probate purposes, or should the solicitor manually override the stockbroker's valuation and increase the dividend figure by £10,000 to £500 million, the banked amount.

The actual dividend received was paid into the stockbroker's bank account, so the stockbroker was aware of the true, correct dividend received. I have already got the stockbroker to amend the first "probate" valuation for other matters, and I suppose I could ask them to amend it a second time for the £10,000 discrepancy.

If the IHT "probate" dividend valuation is to be kept at £499,990,000, I still think the bare trust accounts should have a starting point of £10 billion plus £500 million dividend to reflect the cash actually received.

The solicitor has asked me for my observations on their draft bare trust accounts. What do my learned friends think.

Replies (1)

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By Tax Dragon
07th Mar 2020 08:51

The £10,000 is a distribution but it hadn't been declared at date of death.

Not sure what you mean about the bare trust accounts including that £10,000 from the off. It's income when received.

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