Executors

Some General Terms and Procedures
If you are a Personal Representative - What you should do and when

Some General Terms and Procedures

Before looking at the tax consequences arising on a death, it might be helpful to look briefly at some key terms, at the ways in which property passes on a death to the beneficiaries and at certain procedures that must be gone through before assets are handed over to the beneficiaries.

What is an Estate?

A deceased's estate consists of whatever assets (e.g. bank accounts, stocks and shares, house, land, livestock, jewellery, car, etc.) can be passed on to beneficiaries following the deceased's death.

How does the estate pass on to the beneficiaries?

The assets which make up the deceased's estate can pass on death in a number of ways. Assets left by will pass to the beneficiaries in accordance with the terms of the will. If there is no will (a situation known as intestacy), assets that would otherwise have passed by will pass instead under special rules laid down by law. In addition assets can also pass outside of the will or intestacy.

Examples of assets which pass under the will or intestacy

Assets owned in the deceased's sole name.
Assets owned by the deceased but placed in the name of another person for convenience or some similar reason.
Assets placed by the deceased in the joint names of the deceased and another person without the intention of benefiting that other person.

Examples of assets which pass outside the will or intestacy

Assets passing by nomination, e.g. the deceased may have instructed a Credit Union to pay the proceeds of a credit union account on his or her death to a particular person called the nominee.
Death benefits passing under a life insurance policy or pension scheme where the beneficiaries are particular family members named in the policy or scheme.
Assets passing in which the deceased had an interest for his or her life only.
Assets placed by the deceased in the joint names of the deceased and another person with the intention of benefiting that other person on the deceased's death.

The Personal Representative

The Personal Representative is the person who is responsible for finalising the deceased's affairs. He/she must, within a reasonable time, collect the assets passing under the will or intestacy, pay any liabilities of the estate and distribute the surplus assets to the beneficiaries entitled to them.

If there is a will, it is likely that the Personal Representative has been appointed by being named in the will as its executor and has taken on the responsibility for that reason. If there is an intestacy (no will), the Personal Representative will probably have taken on the responsibility simply because he or she is the deceased's spouse or civil partner or one of the next-of-kin. A Personal Representative who has not been appointed by will is known as an administrator.

Beneficiary

A Beneficiary is a person who inherits either the whole or part of the deceased's estate whether passing under the will or intestacy or outside of the will or intestacy.

Trustee

Instead of providing for property to be given directly to the beneficiary, the deceased's will may provide that, for a specified period, the property is to be held on trust on behalf of the beneficiary by trustees named in the will. Such trusts may arise because the beneficiary concerned is very young, or because the deceased wishes the property to be held for the benefit of one person for life and, on the death of that person, to be transferred to another beneficiary. The trustees will take over the management of the trust property only after the estate has been administered by the personal representative. The trust will then continue until the time specified in the will for the ultimate handing over of the property.

Note: The same person can have more than one role; for example, a Personal Representative can also be a Beneficiary.

Before assets are handed over to the beneficiaries

Before assets are handed over to the beneficiaries certain procedures must be gone through. Broadly, these are as follows:

Assets passing outside of the will or intestacy

In the case of an asset passing outside of the will or intestacy, production of a death certificate by the beneficiary is often all that is required to establish the beneficiary's entitlement to receive the asset in question.

Assets passing under the will or intestacy

In order to get legal confirmation of his or her appointment, the Personal Representative must apply to the Probate Office of the High Court for a document known as a Grant of Representation. The Grant of Representation acts as an assurance to financial institutions (e.g. banks, building societies, credit unions, etc.) and to others that they can safely place the deceased's assets in the hands of the person named as Personal Representative in the grant. The Grant of Representation is also known as a Grant of Probate (where there is a will) or Letters of Administration (where there is no will).

The application for the Grant of Representation will normally be made by a solicitor acting on behalf of the Personal Representative. In straightforward cases, it may be possible to make a personal application for the grant through the Personal Application Section of the Probate Office.

Special Additional procedure relating to money in joint names

In the absence of a letter of clearance from the Revenue Commissioners, banks, building societies and other financial institutions are prohibited by law from releasing monies (other than current accounts) lodged or deposited in the joint names of the deceased and another person or persons. This applies if, at the date of death, the total of all the amounts standing with the institution in the joint names of the deceased and that other person or persons exceeds €50,000. It does not apply, however, to monies which have only been held in the joint names of the deceased and his or her surviving spouse or surviving civil partner.

Applications for letters of clearance for production to financial institutions should be made to the relevant CAT operational area.

If you are a Personal Representative - What you should do and when

In summary this is what you should do about tax - and when you should do it.

This table lists the actions you should take and when if you are a Personal Representative of a recently deceased person
What you should do	When
Notify the deceased's tax office of death	As soon as possible after death
Sort out any outstanding tax issues up to the date of death	As soon as possible after death
Make sure tax is paid on any income or capital gains arising during the period when the estate is being administered	During the administration period

Notifying the Deceased's Tax Office

The deceased's tax office should be advised as soon as possible of the date of death and the name and address of the personal representative. This will ensure that correspondence will be addressed to the personal representative until such time as the administration of the estate is finalised.

The address of the deceased's tax office can be found on any correspondence from that office to the deceased. If you are in any doubt as to which tax office to contact, get in touch with your local district office or see contact details.

Sorting out the deceased's pre-death affairs

As personal representative, you are responsible for settling any outstanding tax matters for the period up to the date of death. Depending on the circumstances, you may need to pay additional taxes or claim a repayment.

Remember that:

if you distribute the estate without paying any outstanding tax liabilities, you may have to pay the tax out of your own pocket.
if you fail to claim a tax rebate due to the estate, you may have to make good the loss to the estate.

If the deceased was self-employed, you will most likely get the deceased's accountant to file any outstanding Income Tax returns and business accounts with the deceased's tax office. As well as Income Tax, you will also need to ensure that any outstanding VAT, employer's PAYE/PRSI, or other taxes in respect of the period up to the date of death are fully paid.

If the deceased was an employee, there may be a PAYE tax rebate due as the deceased's tax credits for the year of death may not have been fully used up. The deceased's employer will send Form P45 to the tax office which dealt with the deceased's tax affairs. Any tax rebate will form part of the deceased's estate. As personal representative, it is your responsibility to file any outstanding tax return on behalf of the deceased.

Completing the Inland Revenue Affidavit

The Inland Revenue Affidavit (PDF, 461KB) is an account of the deceased's estate that has to be completed and sworn by the personal representative in order to get a Grant of Representation from the Probate Office.

What information is looked for in the Affidavit?

The Inland Revenue Affidavit looks for:

a full account of the deceased's assets and liabilities at the date of death;
information on, among other things, assets passing outside of the will or intestacy; and
details of the beneficiaries and of the value of the benefits taken.

To complete the Affidavit, you will need to establish whether the beneficiaries have received any other gifts or inheritances - either from the deceased or from any other person at any time on or after 5 December, 1991.

What happens to the Affidavit?

Two original affidavits are submitted directly to the Probate Office together with all other necessary documentation for the Grant of Representation in the deceased’s estate. The Probate Office/District Probate Registry will check the Inland Revenue Affidavit in so far as the Probate element of the process is concerned. All tax details will become a matter in due course for the Revenue Commissioners.

Further information in relation to Inheritance Tax (Capital Acquisitions Tax).

Income and Capital Gains during the administration period

It may take the personal representative some time to administer the estate during which time income may be earned or capital gains may be made. Broadly the position is as follows.

Income Tax

The personal representative is liable to pay Income Tax at the standard rate on income earned during the administration period. There is no entitlement to personal credits or to any of the reliefs otherwise available to individual taxpayers.
In certain circumstances, the tax office may concessionally agree to treat the beneficiary as succeeding to the inheritance from the date of death. In such circumstances, the beneficiary will take full responsibility for paying Income Tax on the post-death income as if he or she had been entitled to the asset - and the income - from the date of death.

Capital Gains Tax

Death does not give rise to a Capital Gains Tax liability. For example, if the deceased bought shares for €12,700 and they were worth €19,100 at the date of death, the €6,400 capital gain is ignored.
If the personal representative sells any property during the administration period, there may be a liability to Capital Gains Tax - but only to the extent that the value of the property in question has increased between the date of death and the date of sale. Following on from the example above, if the personal representative sells the shares during the administration period for €21,600, the relevant capital gain is only €2,500.
The distribution of property by the personal representative to the beneficiaries does not give rise to a Capital Gains Tax liability.

July 2011

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