Tax treatment of assets

On a death, the property of the Deceased vests in their Legal Personal Representatives (LPR). The LPR can generally only deal with property once they have established title, that is by extracting a Grant of Probate or Letters of Administration Intestate.

Generally, no Capital Gains Tax (CGT) arises on the death as it is not considered to be a disposal. The date for valuation of assets to determine the base cost of the asset is the date of death.

If the LPR sells the asset during the course of the administration of the estate, for CGT calculation purposes any gain or loss arising accrues to the Estate of the Deceased and not to any beneficiary. In such circumstances, the LPR will not have the benefit of any personal allowances that might ordinarily arise to a taxpayer and cannot pass any gain or loss to any beneficiary.

Proving beneficial entitlement

If the LPR is disposing of property to which beneficiaries are absolutely entitled, then it is necessary for the beneficiary with the LPR to prove that the beneficiary has become beneficially entitled to the property so that the LPR is in effect acting as bare trustee for the beneficiary. This can be shown by the LPR:

• vesting the property in the beneficiaries prior to a sale so as to allow the beneficiaries to sell the property in their own right;
• the LPR completing a declaration of trust prior to entering into a contract for sale confirming that the LPR holds the property for the beneficiaries who are entitled beneficially in possession and that it is not held by the LPR in the course of the administration;
• otherwise showing that the valuation date for CAT purposes has arisen for the beneficiary in relation to that property, for example by showing a CAT return already filed showing an earlier valuation date and holding on file written instructions from the beneficiary to the LPR to carry out the sale on behalf of the beneficiary.

In cases where the LPR is the registered owner but selling for the beneficiary who is already absolutely entitled, it is prudent for the contract to state that the sale is being sold by the LPR in trust for the beneficiary as further evidence for Revenue purposes that the sale is being made on behalf of the beneficiary. In the case of sales of shares, this might be shown by formal instructions to the stockbroker when instructing the sale. 

The effect of this is that for CGT calculation purposes any gain or loss arising accrues to the beneficiary who has the benefit of personal allowances.