Iht/cgt Advise

ConfusedUK_2 · 25 August 2008 at 7:53PM

Hi hope someone can help. I have looked through many posts, and indeed posted this question some time ago, and still confused. Two people did try and answer but think i was not as clear as i could be, so here goes.
My Father in Law died 10 months ago,[still ongoing!] the estate was then valued at £295000, cash/shares/property. Property was then valued at £145000.£15000 is to go to other members of family, 20% of the total estate goes to charity, so my wife recieves 80% of the estate.
If my wife wanted to keep the property as an investment/or rental, and then sell it on in say 5yrs time would any profit made be liable for either IHT or CGT.
This was her Fathers main residence, her Mother passed away 25 yrs ago. I t would be nice to have some info before we seek further advise, so we at least know what we are talking about. Many Thanks.

sloughflint · 25 August 2008 at 8:47PM

ConfusedUK wrote: »

Hi hope someone can help. I have looked through many posts, and indeed posted this question some time ago, and still confused. Two people did try and answer but think i was not as clear as i could be, so here goes.
My Father in Law died 10 months ago,[still ongoing!] the estate was then valued at £295000, cash/shares/property. Property was then valued at £145000.£15000 is to go to other members of family, 20% of the total estate goes to charity, so my wife recieves 80% of the estate.
If my wife wanted to keep the property as an investment/or rental, and then sell it on in say 5yrs time would any profit made be liable for either IHT or CGT.
This was her Fathers main residence, her Mother passed away 25 yrs ago. I t would be nice to have some info before we seek further advise, so we at least know what we are talking about. Many Thanks.

There is something numerically not quite right with what you are writing. Your wife can't receive 80% if other members are also receiving money.
£59 000 to charity (20%)
£15 000 to family
£221 000 to your wife (75%)

If the house was not her primary residence, then there would be CGT to consider.

The IHT allowance 10 months ago was £300 000 so no IHT due assuming that there were no gifts made in the 7 years prior to death ( even then the allowance could have been £600 000 if his wife passed all her estate to him so highly unlikely to be any IHT liability)

ConfusedUK_2 · 25 August 2008 at 9:32PM

Yes i know where you are coming from but , my main question is if we make any profit on the property either now or in 5-7 yrs time are we liable for either iht, and or cgt. The reason i ask is -the solicitor that is dealing with the estate has told us- it does not matter whan you se ll the house if the value of it has gone up then this will affect the iht of the estate, whether it be in the next few months or the next several years? Surely the estate is valued as of now, so any profit made would be exempt from iht,[ except cgt]

sloughflint · 25 August 2008 at 9:37PM

I don't understand the solicitor's statement.
My understanding is that IHT is based on the value of the estate at date of death.

Have HMRC accepted the value of £145 000?

I did mention the CGT aspect if your wife wasn't living in the property when she comes to sell.

ConfusedUK_2 · 25 August 2008 at 11:28PM

Thanks for your time. The Solicitor said to my wife if she were to keep the property and then sell it on,- and the price she got for the property took the ORIGINALestate value over £iht limit at time of death then she would have to pay IHT on any profit made, whether this be now or anytime in the future. this makes no sence to us, and he has suggested that he arrange the property to be sold on now and he will arrange this with an estate Agent he often uses. It all sounds a bit fishy to me.

localhero · 25 August 2008 at 11:45PM

Hi ConfusedUK,

You have been misadvised. Any gain in the value from the probate value will be subject to CGT and not IHT.

Here is a similar thread on the same subject:

http://forums.moneysavingexpert.com/showthread.html?t=1085575&highlight=iht

Hope that clarifies.

localhero · 25 August 2008 at 11:54PM

By the way Sloughflint,

I think the OP might have meant that £15k went to family, then the residue is split 80:20

Wife then receives £224,000 and charity receives £56,000.

ConfusedUK_2 · 26 August 2008 at 10:58AM

Thanks very much for the info, it is of great help. Solicitor [also joint executer]has indeed been a bit of a nightmare. We are now thinking of keeping the property and paying off any monies due to charity out of cash from the rest of the estate. This i think will be better for us in the long run [5-6yrs] as an investment, and better return on our money. I do not work[health probs] so we need to plan as best we can. However is it advisable for us to seek further financial advise? Again Many Thanks, PS I did readthat thread and have now read again, seems a lot clearer now.

sloughflint · 26 August 2008 at 11:44AM

Another example of solicitor incompetence!
I thought it when I posted but wasn't 100% sure of my facts. It just goes to show how one has to check up on every single word said by a solicitor:mad:.

sloughflint · 26 August 2008 at 11:53AM

Have I understood things correctly comparing this thread to that linked thread?

* If the property is sold now before the estate is settled ( it was a necessity in the other thread) and there is a gain in value since date of death then any CGT due payable by the executors and executor allowances apply.

* If the property is simply signed over to the beneficiary as there is enough cash to pay the charity/other family members then any CGT would be based on increase in value at time of sale from the probate value and individual CGT allowances would apply?

localhero · 26 August 2008 at 3:18PM

Yes Sloughflint you have understood it perfectly. :T

The point of the link to the other thread was to show when it might become an IHT issue and when it might become a CGT issue.

It is preferable for the beneficiaries to be paying the CGT as there may be the possibility of utilising more than one CGT allowance.

Iht/cgt Advise

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