3.3 Managing shares upon death

A society’s rules should always be the first point of reference in managing shares upon the death of a member. 

The only time community shares can be transferred is upon the death of a member. A nominated beneficiary of a member’s share capital should be held in a society’s membership register. These nomination rights extend to all forms of property in a society, including loans, deposits and shares. 

Nomination rights only apply to the first £5,000 of a member’s property; any amount above this has to be resolved with reference to the member’s probate. 

If the beneficiary is already a member of the society, the maximum individual shareholding rule still applies and if it is exceeded, any excess should either be paid in cash or converted into a loan. 

The beneficiary may also choose to donate the value of the shares to the society and some societies offer this option to members at the point of investment. For Charitable CBSs, there may be the additional benefit of gift aid on the donation. 

If there is no nominated beneficiary, the estate of the deceased member may request the share to be withdrawn in cash. At that point, the directors should uphold that request, if possible, with reference to their withdrawal policy and best practice on ensuring it is in the best interests of the society and the society is not a risk of insolvency. 

It is for this reason that it is recommended best practice that no one individual member holds more than 10% of the total share capital to reduce the risk to the society in this situation. 

Society shares form part of the estate on death for Inheritance Tax (IHT) purposes. In most instances, it is likely that Business Property relief will be available at 100% so that the shares will not be subject to IHT, depending on the activities of the society.