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  • Always make it clear who should pay the tax.
  • IT 2622 is important in the administration of deceased estates.
  • Nobody knows everything.

Betty was a wealthy widow who died without children, leaving everything to her nieces and nephews. In her will, she directed that her commercial property – 15 Sharp Street – must be sold, with the net sale proceeds divided equally between her sister’s children. She left the residue of her estate – mainly a share portfolio – to her brother’s children subject to payment by them of all Betty’s debts, funeral and testamentary expenses.

At least, that’s what you put in the will. In retrospect, you could have made it clearer. At the time of Betty’s death, the property market was strong but the share market was weak, so unhappiness between the cousins soon developed.

15 Sharp Street sold quickly and well, with Betty’s sister’s children pushing hard for a quick payout – with no retention for CGT, which the sister’s children pointed out the estate would have to pay as a debt of the estate.

In support of this, Betty’s accountant said – forcefully – that because the estate could not be sorted out for three years, the capital gain would be taxed to the estate. He said he knew this because he had worked in the area for 30 years and had lots of experience. This upset the brother’s children, because, they said, our cousins got the benefit so why shouldn’t they pay the tax? The accountant was sympathetic but said the will should have been drafted better – so it’s all your fault.

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