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bigduckontax
bigduckontax, Accountant
Category: Tax
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Experience:  FCCA FCMA CGMA ACIS
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My father died in Jan 2013, and he was domiciled in NZ. He

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My father died in Jan 2013, and he was domiciled in NZ. He had UK income from rental property on which he paid income tax .in 2012, he discovered from NZ accountants that he could pay tax in NZ on his worldwide income, and reclaim the UK tax paid .
He started this process in NZ, but he died before it was completed.
The NZ accountants on behalf of his widow,paid the NZ tax out of the joint bank account.
The tax rebate from the UK revenues came back after probate was established on both wills and both wills are clear that any residue in the estate beyond the personal effects ,the joint bank account and specific requests should be divided by the children. The widow who paid for the NZ tax due, is demanding the UK rebate,and I am executor of the UK estate who thinks this rebate forms part of the UK estate .who should get this rebate?
Submitted: 2 years ago.
Category: Tax
Expert:  bigduckontax replied 2 years ago.
Hello, I'm Keith and happy to help you with your question.
The basic position is that the executors take possession of the dead person's assets. Then they pay out funeral etc expenses and other preexisting debts or other liabilities existing at the date of death before the will's directions actually come into effect. Thus you should be paying out the NZ tax item as it constitutes an existing debt as at decease. The rest of the assets then become the residue for distribution in accordance with the provisions of the testamentary writings of the deceased.
I do hope I have helped show the way forward in this matter. It is really very simple.
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 3388
Experience: FCCA FCMA CGMA ACIS
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Expert:  bigduckontax replied 2 years ago.
Thank you for you support, a most interesting question.
Customer: replied 2 years ago.
Thanks Keith.
To get this clear then, if the NZ tax debt was paid before my fathers death, and the UK tax rebate came back after his death , then the NZ tax debt is irrevelant as the instructions in the will supersede this .is that correct?
Expert:  bigduckontax replied 2 years ago.
No, you have it slightly wrong. The situation is as follows.
The NZ tax was paid by a third party who is entitled to reimbursement thereof. It is, as I explained, a prior charge on the deceased's assets before any distribution. You should pay this back along with any other outstanding liabilities at death and funeral expenses before you proceed as executor to fulfill the provisions of the will.
The UK rebate forms part of his estate and would be included in the residue for distribution in accordance with his UK will.
Customer: replied 2 years ago.
Thanks and I wanted to be clear.so the situation was that my father paid the NZ tax bill from his assets before his death, and had he lived ,the UK rebate would have gone back to him.
So the timing was clearly divided by the timing of his death. He paid the NZ tax bill from his joint bank account so I did not understand the reference to a third party when the other actor in this issue is his second wife.
So are you saying that the UK rebate should ofset the lower amount of the NZ tax bill, so that the net benefit should be distributed from the UK will to beneficiaries.
Thanks for the clarification as this point is key
Expert:  bigduckontax replied 2 years ago.
Thank you; you did not actually say that he originally paid a NZ tax bill. He then had a refund which his second wife [the third party] paid into his bank account. That rather changes the situation. Thus the NZ tax refund is part of his estate, his second wife does not require reimbursement and the whole shooting match can be distributed in accordance with his testamentary wishes.
Thank you for straightening out the situation.
Customer: replied 2 years ago.
Sorry but have not finished this as the NZ tax bill was settled in NZ by my father whilst alive and covered his world wide income. He had to wait for acceptance by the NZ tax authorities and during this time,he died. The second wife used the NZ accountants to reclaim UK tax, and found that the UK Revenue would only deal with a UK based citizen, and I was used to reclaim the UK tax in the expection that this was not part of the assets of the estate,but a separate tax matter. I disagree and think any asset realised after death is governed by the wills which are aligned on surplus assets.it was important to the probate process to maintain the position that my father was domiciled in NZ permanently because he had transferred the bulk of his assets to NZ on re marriage where there is no IHT. Can I still maintain that this UK tax rebate belongs to the UK estate and can be disposed of as per the directions.
Hope this gives you more background to come to a final view.
Expert:  bigduckontax replied 2 years ago.
Now you have given fuller and better particulars I concur with your opinion that these moneys form part of his estate for collection by executors and distribution in accordance with his UK will.
You have to be extremely careful in drafting wills to ensure that the document covers the appropriate countries. A NZ will might not cover the UK estate unless it was specifically so framed and were it not covered then any existing UK will (unless revoked, which is a normal preamble in any will) would be effective and in its absence the rules in intestate succession kick in.

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