Tips for dealing with Shares
Anyone who has had to administer an estate will know that they will have wished that the deceased had asked themselves these questions and made these decisions.
Ownership of a modest number of Legacy shares might produce a small dividend cheque but also comes with a tax voucher. The presence of that tax voucher might be the only reason why HMRC require you to make a Tax Return.
Depending on the value, changing the ownership of shares may be the only asset that requires a Probate Application.
If the retention of these shares is important then it would be prudent to bed and breakfast them into an ISA vehicle. Once in an ISA vehicle you will be a nominee shareholder and any reporting requirement disappears for the purpose of Income tax. Disposal of any number of shares and shareholdings will be the subject of one application to the ISA provider in the event of Probate If this modest no of shares is not important then best to consider disposal.
If you buy less than £15000 of shares in a year then it is prudent to buy them under the umbrella of an ISA
Dividends paid in Cash
If your Granny has a few shares from British Gas or Santander then there are two options that she may have taken to take the dividend. Sometimes it can be paid by cheque or direct payment to the bank. In this instance it comes with a tax voucher.
It is beyond the scope of this blog to explain the taxation of dividends but the rules changed significantly in April 2016 and you should seek advice from your accountant on this matter. Typically Granny will have one certificate that identifies how many shares are owned.
Dividends paid by Share Issue
Some companies declare a dividend up to four times a year. Instead of receiving cash you can opt to receive more shares which are issued in proportion to your holding. That share issue still has a value and a Tax Voucher which has to be accounted for but there should also be a new certificate for the additional shares.
Typically Granny will have many certificates that identify how many shares are owned. Because these are very important documents the eccentric often hide them behind the fridge, under the carpet and in the cat’s litter tray.
Shares are looked after by a Share Registrar The Registrar will have its own rules what they require to change ownership after a bereavement. There is no definitive value or number of shares that they will release on an Indemnity. Generally a Grant of Probate will be required. Ownership of Shares will often be the only reason why Probate is required.
Valuation of shares for Probate
Let’s take the example of BP a big company that everyone has heard of:
No of Shares X value of that share on the date of death.
We have to know if that value is Ex Dividend?
We have to know whether these are BP.L shares quoted in London BP.NY shares quoted in New York
We have to know if they are quoted in £ or $
Take British Airways which is now owned by a Spanish company. What effect is the Spanish withholding tax
It will usually be possible to value an American shareholding since information will be available on line but in order to transfer the ownership and/or sell you will need to use an agent in this country who is a Gold Medallion Certificate Holder. Title Research provide this service for us. The cost of these services is uneconomic for small shareholdings. Historically Cadburys and Birds Eye were British companies and former employees and others may have had a small shareholding. Now Cadburys and Birds Eye are American Companies with the associated problems.
Other Action to amuse the Executor
Companies change names and or split. You may find A shares and B shares for the same company.
Companies are sold and move country for tax purposes but are still quoted in the London Stock exchange.
Companies change their Registrar.
If you have a very large portfolio that is useful to you as you live on the dividends then it is likely to be managed by a stockbroker and they can be used to value and do the paperwork to transfer the ownership.
If you have a modest portfolio that you manage yourself then this will become a serious burden to your executor and add to the costs of dealing with your estate. Take serious consideration of porting them all into an ISA framework.
If you have one or two tiny shareholdings then consider the merit of disposing of them in your lifetime otherwise the cost of disposal may exceed their value.
I once dealt with an estate where the deceased speculated in mining shares all around the world. It is well known that Mining shares consist of a hole in the ground with a consummate liar at the top.