Jurisdiction(s):
United Kingdom

Related legal acts

Key definition

Liabilities definition

What does Liabilities mean? In practice, a scheme’s liabilities are what it owes: the future benefit payments (for example, pensions and lump sums) and the scheme’s expenses. They are usually measured as the present value of expected cashflows, determined by an actuary using assumptions on discount rate, longevity, inflation and expenses. Comparing liabilities with the market value of assets gives the funding level: a deficit arises where liabilities exceed assets; a surplus where assets exceed liabilities. “Liabilities” is a descriptive term used across legal, actuarial and accounting contexts rather than a single statutory definition. However, valuation bases are prescribed for particular purposes. In...

Ascertaining the Residuary Estate: IHT, Income Tax, CGT, Valuations, Expenses and HMRC Procedures (England and Wales)

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Practice notes

The residuary estate

Under Section 33 of the Administration of Estates Act 1925 (AEA 1925), the residuary estate means the balance of money and any investments currently standing in place of it, together with any unsold portion of the deceased’s estate which is not needed to settle funeral, testamentary and administration costs, debts, other Liabilities, and pecuniary legacies. The residue is not confined to cash; it commonly embraces further property that remains neither sold nor distributed during administration.

After all liabilities (including tax) and legacies have been discharged, the Personal representatives (PRs) must identify the contents of the residue, namely the assets or sum left to be shared among the residuary beneficiaries. To determine the residue, the PRs should first:

finalise the tax position, and
address administration expenses

Income tax to the date of death

Completing the tax return

If the PRs have been unable to use the Tell Us Once service, they must inform HMRC of the death. In any event, if the deceased was required to complete a Self...

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