Estate interest during administration

[Wilde22]

I’m coming to the end of administering a deceased relative’s estate. I am sole executor and sole beneficiary under the Will.

Having obtained Grant of Probate, I closed the deceased’s accounts at their building society in Nov’24, and transferred the total balance to a new account opened there for this purpose. This new account was opened in my name, linked (I presume?) to another account of mine held there, not to the deceased.

Apart from ISA interest, closure of the deceased’s accounts caused a sum of interest to be calculated & credited in the total transferred, which was over the £500 limit ignored for estates. I will need to declare interest on this, I have read that I can write to HMRC to do this (please expand if you know more).

As I approach the end of probate and distribution (to myself), the sum of money in the newly opened account will also have earned substantial interest. I’ve been thinking of this as also the estate’s interest, and that I’d need to declare this too, by closing the account to force calculation of it now, to submit to HMRC.

Then it occurred to me that this savings account might be seen by HMRC as my own, not the deceased’s, i.e. it was linked to my own N.I. number at opening? If correct, I could then treat the closure & transfer In Nov'24 to a new account as an interim distribution of cash to myself, then leave it open, and when (after probate is finished) it credits annual interest this November, I could declare that amount as mine not the estate’s. I would also benefit from the £1k personal savings allowance, not the lesser £500 interest ignored for estates. It would also avoid closing a savings account (to force interest calculation now, for declaration) which I might overwise keep open holding the funds.

Is my reasoning correct, i.e. is this legitimate?

[AGoodman]

This seems reasonable provided the new account was opened in your name and not "Estate of..." or "Executors of..."

[Wilde22]

Yes it was just in my name. Since posting the question, I managed to get through to the HMRC advice line (not easy) and they have said the same as you, that the new account would be seen as mine not the deceased's. He wasn't completely sure how this works when I asked if it was connected to a National Insurance number, but seemed confident the new account could be treated as mine for tax purposes.

As an aside, when I visited a high street bank to open a probate current account (for the day to day banking needed e.g. Direct Debits etc) a long conversation with staff there persuaded me likewise not to have any reference such as 'Executor of..' in the title. The advisor said that accounts titled like that (as they were 30 years ago) would require me to visit the branch to have every single debit approved! As if it were now the job of a major high street bank to police the transactions of a customer who arrives with Grant of Probate to show them. When did this happen?

[AGoodman]

Banks don't like executor accounts - they hate trust accounts much more: to the point it is now extremely difficult to open a regular bank account for a trust with a small cash balance (small being less than say £200k).

Only 3-4 banks will open such trust accounts at any one time and they frequently change their mind and close to new accounts. I suspect they have decided that the profit to be made isn't worth the extra admin and regulatory risk involved now that they have to deal with numerous KYC and reporting requirements (look up CRS if you're ever suffering from insomnia).

[Wilde22]

Well I certainly got the impression they were unwanted business even 20 years ago! I completely see they're not profitable, short term, no overdraft, car loan or credit card spinoff sale. They're a service to the customer, which is why I'd always believed your own bank would offer them as a loyalty service. It's bad practice to mix probate funds with your own personal account, but are we slowly being pushed that way? Or are we expected to pay a professional a tidy sum?