The complexities of shareholdings in estate administration

When it comes to estate administration, dealing with shareholdings can be one of the most intricate tasks faced by the Executors or Personal Representatives (PRs) responsible for administering a deceased person's estate. Shares often come with a maze of administrative, financial, and legal hurdles that require specialist expertise to navigate efficiently. At Kings Court Trust, we understand these complexities and provide tailored support to ensure every estate is handled with precision and care. This blog delves into some of the common challenges of shareholdings in estate administration and how to address them effectively.

1. Replacing lost share certificates

One of the first hurdles Executors may encounter is the absence of share certificates. When shares are held without proper documentation, the process to replace these certificates can be time-consuming and involves several steps:

• Contacting share registrars: If the company associated with the shares is known, registrars can issue replacement certificates. However, they often require a Deed of Indemnity to confirm ownership at the date of death. A Deed of Indemnity is an agreement between two or more parties, which specifies the actions and consequences if particular event(s) occur;
• Fees and documentation: There is usually a fee for issuing a replacement certificate and completing the forms. Additionally, a copy of the Grant of Probate will likely be necessary.

If no records of the shares exist, but their existence is suspected, Executors may need to engage specialist services. Asset repatriation experts, such as Title Research, can perform thorough searches to locate, value, and verify lost shares, expediting the estate administration process.

2. Validity of share certificates

Share certificates generally remain valid until the shares are sold or transferred. However, certain events, such as company mergers or acquisitions, can render them invalid. To check the validity of a share certificate:

• Contact the company’s share registrar;
• Engage professional estate administration services to verify shareholdings and uncover any issues (such as invalid certificates) to confirm the names in which shares are held.

For example, we dealt with an estate in which our client initially believed there were shares in over 60 different companies. Upon reviewing the share certificates, we were able to identify 40 individual shareholdings due to mergers. We also discovered that some of these shareholdings were in joint names with a pre-deceased spouse, some in the deceased's maiden name, and three with companies trading in America.

3. Unclaimed assets in the UK

The challenge of unclaimed shares, dividends, and other assets has grown significantly. The Financial Times reported that 20 million people are affected by dormant assets, with billions lost in pensions, savings, and investments. Key figures include:

• £37 billion in lost pension funds
• £2.5 billion in lost shares
• £4.5 billion lost from bank and building society accounts
• £60 million lost from National Savings and Investments (NS&I)

The movement towards online financial management, frequent job changes, and poor record-keeping have made it increasingly difficult to track assets. Executors must conduct comprehensive asset searches to fulfill their obligations and avoid significant risks, such as:

• HMRC fines for misreported Inheritance Tax;
• Personal liability for undiscovered assets or unpaid liabilities;
• Additional costs of reopening estate files after distribution.

4. Handling foreign shareholdings

Globalisation has led to an increase in foreign shareholdings within estates, often without the deceased’s knowledge. Shares in non-UK companies present unique challenges due to differences in legal systems, time zones, and processes. To effectively manage foreign assets, Executors should:

• Begin the process early, as selling overseas shares can take significantly longer;
• Work with specialists who are experienced in international estate administration.

We are experts in managing complex estate administration cases and have trusted partners who are experienced in managing international shareholdings and assets, together ensuring that the necessary grants, reseals, and processes are completed efficiently.

5. Tax implications of inherited shares

Inheriting shares comes with specific tax considerations, including Income Tax and Capital Gains Tax (CGT):

• Income Tax: Dividends earned after inheriting shares may be taxable if they exceed the personal allowance and dividend allowance. These are yearly income allowances set out by the government of what you can earn before paying tax. The standard personal allowance is currently £12,750 and the April 2024-2025 dividend allowance is £500;
• Capital Gains Tax: Any gain in value from the date of death to the point of sale could be subject to CGT, which is a tax on the profit when you sell an asset that’s increased in value;
• Inheritance Tax: Executors can claim relief if the shares are sold within 12 months of death and their value has decreased. Inheritance Tax is a tax on a deceased person's estate when it exceeds thresholds outlined by the government;
• Jointly Owned Shares: These automatically transfer to the surviving owner who would need to consider CGT if they sold the shareholdings. 

Understanding these tax implications is vital to accurately calculate liabilities and ensure compliance.

FAQs on shareholdings in estate administration

Q: What happens if I can’t locate all shares?

A: If shares cannot be located, specialist services can help perform thorough asset searches to uncover missing information, ensuring all assets are accounted for during estate administration.

Q: Do I need a specialist to handle foreign shares?

A: If shares cannot be located, specialist services can help perform thorough asset searches to uncover missing information, ensuring all assets are accounted for during estate administration.

Conclusion: Trust the specialists

Administering an estate with shareholdings can be fraught with complexities, from locating lost certificates to handling tax obligations and unclaimed assets. At Kings Court Trust, we have the expertise to navigate these challenges and provide Executors with peace of mind.

Explore more about our estate administration services or download our free guide for Executors to better understand the responsibilities and how we can help at every step of the journey.

Do you have any questions about shareholding you are dealing with, as part of estate administration? Fill in the form below and a member of the team will be in touch: