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TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15979
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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Hi , Could you please advise. My daughters dad passed away

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Hi ,
Could you please advise. My daughters dad passed away last year. He died without a will. His parents requested that I as his daughters mum acted as his personal rep to sort out his estate etc. and act as trustee to my daughter for any funds left to her. Once the estate was finalised I purchased a property which is in mine and my sister (her other trustee) until she attains the age of 18... That is on the title deeds. In the meantime I rent the property and the rental income goes into an account in my daughters name but with me and my sister as trustees. Could you please advise on what tax will be due on the rental income seeing as my daughter is a minor ... Age 9 , and she is the beneficiary of the income. Thank you , claire

Can you confirm how it was decided that, in the absence of a will, the money left by her father was left to your daughter.
Customer: replied 4 years ago.
My daughter is the only dependent .... so the solicitors we used to manage the intestate advised it automatically goes to her under the law of intestate


Leave this with me while I draft my answer. There is quite a bit for me to cover so please bear with me.

Customer: replied 4 years ago.
Hi Tony, could you please give me an estimated time on your response please. Thank you
I'm drafting my answer now and will be finished soon. This is quite a complex matter as you will see when I've posted my answer.

Hi again.

I'd advise you have a solicitor or a tax adviser handle the work required for a trust that I will detail below for you.

As your daughter is the minor child of a deceased parent, you should make a vulnerable beneficiary election so that your daughter will benefit from more favourable tax treatment than would otherwise be the case. The election needs to be made no later than 12 months after the 31 January following the end of the tax year in which you wish the election to take effect. Take a look here for some useful information on a vulnerable beneficiary election.

Without an election, the trust would pay tax at 45% (20% on the first £1,000) on the net of expenses rental income as disclosed in a trust tax return, though it would be possible to reclaim most if not all of that assuming some or all of the income was paid out to your daughter or used for her benefit and a repayment claim R40 was completed annually. If the income was accumulated within the trust, the tax paid would roll up and be imputed to your daughter as and when income payments were made to her or for her benefit, school fees, clothing, for example. The high tax rate can cause a cash flow problem so its best to avoid it if at all possible.

The effect of a vulnerable beneficiary election is to reduce the tax liability by an amount so that it equates to what the tax liability would have been had the income been paid direct to the beneficiary. Take a look here and here for some examples of how the tax is adjusted. The tax rates are out of date. The current trust rate of income tax is 45% (see here). Any income paid out to your daughter or used for her benefit will be excluded from the election. Your daughter, whilst a minor is allowed to have an income of £9,440 tax free in the current tax year as are adults under 65.

A trust tax return SA900 will need to be completed at the end of each tax year. I do trust tax returns and I use software to complete them. I would not attempt to complete one manually because of the complexity of the tax calculations.

I hope this helps but let me know if you have any further questions.

TonyTax and other Tax Specialists are ready to help you
Customer: replied 4 years ago.
Thank you , yes it is very complicated.... Do you take on cases like this?
I do take on cases like this but I'm not allowed to take on work through this site unfortunately.
Customer: replied 4 years ago.
Are you allowed to recommend someone? Or would any accountant / tax expert be able to do this for me?
I'm not allowed to recommend anybody I'm afraid.

You need to find an accountant or tax adviser who knows about trusts or a solicitor who know about trust tax. It's a specialist area. The solicitor who handled the intestacy may be able to recommend a professional in your area.

The trust software I use costs less than £20 before VAT if you only need to complete one trust return annually. I'd tell you what it is but I'm not allowed to promote third party products.