Will Trust query - recent death of life tenant

[TaxLobster]

I am one of the Trustees of a Will Trust, responsible for managing a share portfolio and paying the income to a relative (ie the life tenant) for many years. This elderly relative has recently died, and under the terms of the trust, which is now being wound up, the capital is now to be divided up between several other relatives (ie the remaindermen).

I have asked the accountant employed by the Trust to prepare final accounts for the Trust and to let me know what moneys are due to the estate of the life tenant, which he has done - he has based it simply on any dividends and income received by the Trust before the date of the life tenant's death being due to the life tenant's estate.

However, the solicitor who is dealing with the IHT account has indicated that this is inadequate, and I need to calculate pro rata for each share-holding, the proportion of the dividend payable to the tenant during each company's current financial year.

Therefore, assuming the date of death was 1st of February, and shares were held in Acme Ltd, whose financial year-end is 31 March, then a proportion of 307/365 of any dividends paid by Acme during the current financial year are payable to the life tenant's estate, with the balance going to the remaindermen (if I understand thus correctly).

This sounds like a horrendous amount of effort, apart from anything else, and I imagine the professional fees involved in tracking down all this information will greatly outweigh any small discrepancy in the moneys due to be paid to either life tenant's estate or the remaindermen. And what happens if shares are sold before dividends are paid? What about interim dividends - do you lump together the whole financial year to do the calculation? etc etc etc....

I haven't been back to the accountant about this yet, but first can anyone advise whether the above is normal practice?

Thanks for any advice.

[Lee Young]

If the Will were a fairly modern one then the effect of the Apportionment Act (1870 I think) would be disapplied, in which case the way the apportionment would be done is as you thought - if paid before death due to the life tenant, if paid after then to the remaindermen. If the Approtionment Act applies then it is how the solicitor indicates. I would have thought however, that the beneficiaries of the life tenant's estate and the remainderman should agree not to apply those rules because of the time effort (and thereofre cost) involved, as ultimately it might make little difference.

I assume the IHT position has also been settled?

[maths]

If the will has not excluded the statutory apportionment rule, in ascertaining the split re dividends paid after death but relating to a time period pre death it is important to identify the period in respect of which the company is paying the dividend not simply that date any dividend is actually paid.

In other words if life tenant died 1 Feb 2011 and company year end is 31 March 2011 and a dividend was due and actually paid on 1 March 2011 but in respect of year end 31 March 2010 no apportionment would be necessary.

Not quite sure whether your solicitor is agreeing with this or not.