inheritence tax/cgt on gifts

kestra

hi dont know if this is the correct place,

friends mum passed away recently and the thing is she sold her house 6 years ago and gave nearly 80k to my friend to buy a house. leaving around 40k in savings which there was a understanding would be left to older sister on her death.

Unfortunately no will was made and all has now went to probate

The mum lived in the house rent free all this time as my friend looked after her mother and paid all bills, but the mothers name was not on the mortgage.

the older sister now wants share of the gifted money even though the house is in my friends name. My friend knows she will probably have to pay inheritence tax or capital gains but is worried she will have to now sell her house to pay sister/tax bill.

if the gift is added for inheritance tax it seems it all comes to under the iht nil band as its only 120k, but what would be the potential capital gains bill? would she be solely liable? and can teh sister have a claim on the gifted money in the house she now lives in?

all help appreciated!

CLAPTON

The laws to do with the Inheritance of intestate estate (i.e. no will)
and those to do with Inheritance tax and
those to do with CGT are all different.

As far as inheritance is concerned the mother left 40k.
In law this is divided, net of costs (funeral, debts etc) between the two sisters... i.e. 20k each.
The older sister has no rights to the house or the gift of 80k made earlier.


There is no inheritance tax to pay as the total estate is less than 312,000.


CGT is rather complicated and I'm not entirely sure what the HMRC would say. As your friend presumably lived in the house I would think the house is outside CGT and no tax would be payable.

ceeforcat

As Clapton suggests- there would be no inheritance tax or Capital Gains tax to pay. The gift of £80000 was to your friend and she used this money to buy a house. That was entirely up to her. The fact that she used it to buy a home is irrelevant from the estate point of view. There would be no Capital Gains tax to pay as it appears to have been her main residence throughout.

Her sister is entitled to a half share in the estate – the gift of £80000 forms no part of this. The older sister may have gripes about this but there is nothing that she can do. She can have absolutely no claim on the house nor on the money used to purchase it.