Estate Accounts: A Guide for Executors

What estate accounts are - and what they are not

Estate accounts are not a formal statutory requirement for most estates. You will not be prosecuted for failing to produce them. But every residuary beneficiary has the right to request them, and failing to produce a clear and accurate record is a common source of disputes between executors and beneficiaries.

Estate accounts are a clear, organised record showing beneficiaries three things: what came into the estate, what went out of the estate, and what remains to be distributed. They are not trading accounts, not a tax return, and not an audit. For most simple estates, a clearly laid out document using plain English is perfectly sufficient.

For larger or more complex estates, some executors choose to engage an accountant or solicitor to prepare the accounts. This is particularly worth considering if the estate is subject to significant income during administration, if there are multiple beneficiaries with different entitlements, or if any beneficiary is likely to scrutinise the accounts closely.

The three sections every set of estate accounts needs

Format and presentation

There is no prescribed legal format for estate accounts for most simple estates. What matters is that the accounts are clear, accurate, and complete. A well-organised Word document or spreadsheet is perfectly acceptable.

• Date the accounts clearly. State the period of administration they cover (from date of death to date of completion) and the date the accounts were prepared.

• Label each section clearly. Capital account, income account, and distribution account should be clearly separated and headed.

• List each asset separately. Do not aggregate bank accounts unless they are at the same institution. Beneficiaries want to see the detail.

• Explain any unusual items. If there is an expense that a beneficiary might question, add a brief note explaining it. Transparency prevents disputes.

• Consider professional help for complex estates. If the estate involves significant income during administration, multiple different beneficiary entitlements, trusts, or large sums, a qualified accountant or solicitor should be asked to prepare or review the accounts.

When to prepare the accounts

Estate accounts should be prepared at the end of the administration, once all assets have been collected in, all debts and taxes have been paid, and you are ready to make the final distribution. Do not attempt to prepare the accounts while the estate is still outstanding - the numbers will change.

The typical sequence is: prepare the accounts in draft, send them to the beneficiaries for review, address any queries, obtain signatures on the final version, and then make the distributions. This order protects you - making payments before beneficiaries have signed off on the accounts can create disputes about what was agreed.

Getting beneficiaries to sign: protecting yourself as executor

Before distributing the residue, ask each residuary beneficiary to sign a copy of the estate accounts confirming they have received them, they are satisfied with the accounts, and they consent to the distribution shown.

This signed receipt is your primary protection if questions are raised after the distribution. An executor who can produce signed accounts and receipts from all beneficiaries is in a very strong position. An executor who distributed without written sign-off is in a much more vulnerable one.

If a beneficiary refuses to sign or raises concerns, address the issue before distributing. Read our guide on beneficiary rights to understand what beneficiaries are entitled to request and how disputes are typically resolved. For more on how the residue is calculated and distributed, see our guide on the residuary estate.

Tax during administration

Income earned by the estate during the period of administration is taxable. HMRC treats income earned by the estate as assessable on the personal representatives (that is, you as executor). For most simple estates with modest amounts of income, HMRC handles this informally on correspondence without requiring a formal return.

However, if the estate earns significant income during administration - for example, from a rental property, a large investment portfolio, or a long administration period - you may need to file form SA900 (estate income tax return). If you are uncertain, contact HMRC's trusts and estates helpline or seek professional advice before making the final distribution.

Income tax paid by the estate can affect how much is available for distribution. Make sure any income tax liability is settled before preparing the final distribution account. For more detail on dealing with HMRC throughout the process, read our guide on executor duties.

What to keep and for how long

Once the administration is complete, keep all supporting documents for at least 12 years. This includes:

• All correspondence with banks, institutions, HMRC, and beneficiaries

• Asset valuations and date-of-death balance confirmations

• Receipts for all expenses and all distributions

• Signed copies of the estate accounts from each beneficiary

• The probate application, the grant, and all sealed copies

• Any IHT correspondence and forms submitted to HMRC

Claims against executors can be brought up to 12 years after the relevant transaction in some circumstances. Retaining documents protects you for the full period. Store them securely - either physically in a labelled file or digitally with backups.