Income recognition post death of spouse

Income recognition post death of spouse

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Hi all,

I represent two clients, husband and wife, unfortunately the wife has passed away, and has left her business assets in one trust and her remaining assets in another trust.

Included in her personal assets in one property, which on paper is owned wholly by her, however, they have always split the income related to this property on a 50/50 basis.

I have been asked by the solicitors acting on behalf of the estate to clarify how the income is to be dealt with moving forward, assuming the property is treats as being owned soley by her.

My initial thought is that the whole rental income should go into the trust, and distributed to the beneficiaries if the property is to be treated as wholly owned by her.

Any advice would be greatly appreciated.

Many thanks all

Replies (10)

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paddle steamer
By DJKL
05th Apr 2023 17:55

"Included in her personal assets in one property, which on paper is owned wholly by her, however, they have always split the income related to this property on a 50/50 basis."

Why and how have they done this?

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Replying to DJKL:
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By LEO4929
05th Apr 2023 19:14

Thank you for your reply!

The husband received inheritance which he gifted to her to purchase the property many years ago, and they have shared the income ever since!

I inherited this client last year and was only made aware that the property is in her name solely by the solicitors, post her death last month!

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By Tax Dragon
05th Apr 2023 19:25

Is the solicitor asking you a legal question ("whose income is it?")?

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Replying to Tax Dragon:
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By LEO4929
05th Apr 2023 19:42

Yes, that’s what they are wanting to know!

Cheers

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Replying to LEO4929:
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By Tax Dragon
05th Apr 2023 20:30

If the solicitor doesn't know, and you don't know, and the both of you have seen the relevant documents and spoken with the relevant people... how do you expect anyone in here to know, when we haven't done either of those things?

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Replying to Tax Dragon:
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By LEO4929
05th Apr 2023 21:31

I’m only asking for some suggestion from other professionals on how they would treat the income moving forward, as it only came my attention that the property was owned wholly by her when I received the letter from the solicitors!

As I said, I took on the client last year, and their previous accountant split the revenues 50/50 for some 15 years or so!

So my initial thought was that the trust should receive 100% of the income, and the beneficiaries would draw from the trust!

If you have any suggestions before I reply to the solicitor with my initial thought, that would be very helpful.

Many thanks

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Replying to LEO4929:
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By Tax Dragon
05th Apr 2023 21:51

This isn't about tax. It's about who owns what. That's not up to you, is it? Who were the executors? What do they think the deceased owned? Is that disputed by the widower/ANOther? What did the executors tell HMCTS/the probate office? Did they (the executors) take legal advice? Why are you doing other people's jobs? Most of all... why is the solicitor asking you?? And why-oh-why are you trying to answer???

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Replying to Tax Dragon:
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By Hugo Fair
05th Apr 2023 22:33

Loads of questions ... and all spot on IMHO.
I'd been about to ask what OP thinks 'on paper' means in the phrase "one property, which on paper is owned wholly by her" - but your questions cover all that.

OP: when you say "represent two clients, husband and wife" ... in what capacity?

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Replying to Hugo Fair:
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By Tax Dragon
06th Apr 2023 06:05

You have brought me back to the question. "I have been asked by the solicitors acting on behalf of the estate to clarify how the income is to be dealt with moving forward, assuming the property is treats as being owned soley by her."

"The solicitor acting for the estate" - answers some of my questions. But "assuming the property is treats as being owned soley by her" adds another - the one DJKL asked up top.

Nevertheless, my opening point about it being a legal matter is true. Perhaps the solicitor is really asking whether the widower - OP's remaining client - plans to contest the executors' 'claim' to the property? And OP is planning to answer that he doesn't. So let me throw a few more questions out there...

Has OP spoken with his remaining client about any of this? And here's a tricky one: should OP do so? (We don't know the terms of the trusts; is widower life tenant of both? Either? Neither? Are her children his children? Etc etc. The particular case here is not a matter for discussion in a forum, and generally Awebbers advise each other - quite correctly - not to get involved with or in family disputes. But if you act for only one member of the family and think they might be entitled to something... might you at least suggest they have a chat with their solicitor?)

I've gone away from the question again, following a tangential line of thought. But we in here don't know any of the answers to any of the questions in this thread - OP's, DJKL's, yours, mine. Nevertheless, I suggest the OP should be slow to answer the solicitor's question. And not just because it's in itself a legal matter, but because - possibly - the answer has legal consequences that the OP has not considered and that it's not OP's place to be a part of. [And if so, and OP's answer has a detrimental effect on OP's client, then OP might find him/herself at the wrong end of another legal process.]

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Replying to Tax Dragon:
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By Tax Dragon
06th Apr 2023 06:11

(I find it hard to believe that the answer the OP proposes hasn't already occurred to the solicitor. I therefore do wonder whether there is more behind the solicitor's question than OP appears to have realised. Of course I may be, and probably am, a million post-Brexit miles from the truth of it. But hey - Speculation and Guesswork are Aweb's middle names.)

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