Under UK law, the executor legally owns the assets within the estate. However, from a transaction reporting perspective, it is viewed as a transaction between the deceased and the beneficiary (the rules specifically say the deceased is the ‘seller’).
Whereas from a UK legal perspective we might tend to view it as a transaction from deceased, then to executor, and finally to beneficiary.
In practice, if the beneficiary held an account on a different platform to the client, the transaction to change beneficial ownership would be happening mid-flight between the two platforms. This type of transaction is challenging to report, and many platforms are unable to do it, so may refuse to allow it.
One solution to this is for the beneficiary to open an account on the same platform as the deceased client. The transaction would be taking place all on the one platform, making it straightforward to report. The beneficiary would then be free to transfer their holding to their platform of choice.
Similar cross-platform issues can arise with spouses gifting assets to each other and discretionary trusts distributing assets to beneficiaries.
There can also be challenges around investment purchases as well. While executors will not typically be buying new assets with estate funds, there may be situations where they want to instruct the existing discretionary manager to continue managing or rebalancing the portfolio.
Under the transaction reporting rules, there is no mechanism to report the deceased or the executor as the ‘buyer’. If the transaction cannot be reported, the investment provider may refuse to allow it.
Martin Jones is technical manager of AJ Bell
