Probate - Debts vs. Expenses

[omniflow]

I've googled this, and not really found an answer to the question I have. It might be a case of me asking the right question, but who knows?

I have the following scenario:

Mum suddenly became quite ill.
Mum had committed to some fairly extensive external building works / redecoration - due to begin early May.
Mum agreed to a re-fit of her house due to her illness (making bathroom and kitchen more suitable for a less mobile person)
Mum died before she could move back into her house - late March
Bathroom re-fit completed on the day she died

My view is that all of the costs associated with the bathroom refit that weren't paid out before she died are debts for the estate - however, this may vary depending on the date that invoices were received.

However, I am less sure how to treat the costs for the external building works - they were committed to prior to death, but the work hadn't started. However, scaffolding has been booked, permits applied for and granted (scaffolding will partially block a road), 3rd parties booked and committed, materials ordered etc. My assumption is that this becomes an expense, but there are some arguments that this could be classed as a debt. The work is necessary to preserve the fabric of the house and protect the value of the estate.

From and HMRC / IHT perspective I think it's a wash - the total value of the estate is comfortably below the IHT allowance, so the precise classification of £10K - £15K won't make a material difference. However, I am expecting my Sister to kick up a massive stink and object to absolutely everything she can, so I'd like to get everything as precise as possible.

I'd rather not involve a probate solicitor, so any input from the non-experts on here would be appreciated.

[Edible Roadkill]

How I see this situation: Everything gets valued at date of death and probate applied for. Bank accounts frozen and no funds can flow until probate is granted, it’s then on you if you are having this work done but you might not want to proceed with it as you then may be liable for capital gains if the work pushes the property value.

IIRC debts can only be for things like mortgage payments and funeral expenses.

You’ll just need to contact the builder and tell them that their client has passed away.

[alscar]

Technically debt but becomes expense of estate as presume you and your sister are both Executors and / or need to agree.
But equally presume you have been left house so want to maximise value for beneficiaries which is usual.
Other alternative is to pay up to date work done as debt or expense then cancel rest with resultant costs.
I would treat as expense either way.
Once Sister can see numbers written down difficult to see how she can object.
If she isn’t executor and your call only much easier but either way just ensure you write everything down.

[alscar]

Edible Roadkill said:

IIRC debts can only be for things like mortgage payments and funeral expenses.

You ll just need to contact the builder and tell them that their client has passed away.

Lots of different debts can be settled post death but there are limitations on what the deceased’s bank account itself can be used for - as you say largely this is limited to the funeral costs.

[NortonES2]

Edible Roadkill said:

Bank accounts frozen and no funds can flow until probate is granted,

Depends how much is in the account whether the bank requires probate or not before releasing the funds.,

[The Gauge]

NortonES2 said:

Depends how much is in the account whether the bank requires probate or not before releasing the funds.,

True. I went to my mums banks to inform them if her death and I was surprised when they asked if I wanted to receive all her money as her balances were below their threshold to require probate. They just transferred the money over there and then. Other banks wouldn t as her balance was above their threshold. They all seem to have different threshold limits, ranging from £30k to £50k

[Sheepshanks]

omniflow said:

.....
However, I am less sure how to treat the costs for the external building works - they were committed to prior to death, but the work hadn't started. However, scaffolding has been booked, permits applied for and granted (scaffolding will partially block a road), 3rd parties booked and committed, materials ordered etc. My assumption is that this becomes an expense, but there are some arguments that this could be classed as a debt. The work is necessary to preserve the fabric of the house and protect the value of the estate.

My amateur thoughts:

What's the total cost of this work, and what's the value of the house?

If it is literally just maintenance and it's reasonably in proportion with the value of the house then I think you can treat it as an expense on the estate. If it's improving the house then that's a different matter, and, as another poster mentions, opens a can of works re CGT for the estate.

If you cancel the work and there are penalties, then those could be regarded as debts on the estate.

Any work already done can be paid for, I don't think the date of the invoice matters.