Probate and selling an inherited house advice please

david29dpo

The executors of the estate have a duty to get the best price so its quite normal for a property to go on the market at a time to get the best price. If it does sell before probate, the executor simply looks after the money then gives it you when probate is granted.

theartfullodger

Clutton stated "if you sell the house on, then you need the house's maximum value on the probate form in order to reduce your capital gains liability"

.. not sure about that Dear Ones... Whilst he is strictly correct re. CGT there is the question of Inheritance Tax. I'm not certain about this being an 'umble human & not a tax expert but... try this..

CGT is I think @ 18%..
Inheritance Tax is @ 40%.
- over the various thresholds....


so... assume probate valuation is £425k and the 6thApril2009 threshold of £325k applies and rest of estate valued at £50k. (There are other circumstances like husband & wife).
House eventually sells for £405K.

Inheritance Tax would be 40% of £150k => £60k.
CGT would be £0. Total tax £60k.



On the other hand .. assume probate valuation is £365k and the 6thApril2009 threshold of £325k applies and rest of estate valued at £50k. (There are other circumstances like husband & wife).
House eventually sells for £405K.

Inheritance Tax would be 40% of £90k => £36k.
CGT would be 18% of £40k => £7.2k. (? Less allowances?) Total Tax £43.2k.

- Any comments tax experts?? Clearly what goes on the Probate Form must only be the correct figure arrived at fairly. HMCS/MHRC have "interesting" powers if they think something funny is going on.

I remember when we sold my parents house. We got 5 estate agents round (there were several beneficiaries and we wanted to be certain there'd be no arguments about deals being done behind backs later). Valuations differed IIRC by over £80k.

Best of luck & congratulations on your inheritance, albeit in sad circumstances..

Lodger

tootsmyboots

Thanks all, the advice I have been given is that Capital Gains will not apply in this case as I will not live in the property, intend to sell it as soon as probate is granted and also that it is clearly worth less than when it was purchased 2 years ago. I got this to back up what I was advised from direct.gov.uk, I hope it is ok to paste the bit I am referring to:

"If you decide to sell the property


Paying Capital Gains Tax

Capital Gains Tax (CGT) is paid when someone makes gains (profits) above a certain level when selling certain assets. However, when someone dies any increase in the value of the property up to the date of the death isnt subject to CGT.
If you sell it later, there may be CGT to pay on any gain since the date of death though this won't usually apply if you sell an inherited property that you've been living in as your main home since you inherited it."

I will be putting it on at the price suggested from the estate agents and so will clearly get a lower offer than this as that is how the game tends to be played.

I could be wrong, but I anticipate it should sell as the houses in this area have been selling, apart from the 4 bedroom upwards market. This is a 2 bed semi. I do not expect to make a profit or to make what it was bought for 2 years ago.

Thanks again. Also to explain, there are no other executors involved, just me. Also there will be not inheritance tax, it is below the threshold. The solicitors are not dealing with probate, but I will of course use one in the house selling process.

It is not something I imagined having to deal with at this point in my life (a very unexpected and sudden death in the family)

margaretclare

This happened to some friends of mine not long ago and they found out that a house sale can't go through until probate is granted. They lost several prospective buyers because probate took so long....

theartfullodger

Toots:

I read the extract slightly differently...Albeit I doubt there'll be anything to pay.
"
If you sell it later, there may be CGT to pay on any gain since the date of death though this won't usually apply if you sell an inherited property that you've been living in as your main home since you inherited it.
"

You say you won't be living in it...CGT is payable, as I understand it, on 2nd homes (which I guess this would be) IF a Capital Gain is made between when you acquire it (inherit it in this case, I guess the effective date is that of the demise..) and when you sell it.

So CGT would apply, but in a static/falling market unlikely to come into effect.

To be cast-iron certain I'd want Probate valuation(s) for value at date of demise anyway & then clearly you/HMRC would know what it sold for. As long as there is no significant increase between the two to take you over your CGT annual allowance (08-09 is £9,600) no CGT tax to pay...


Did I get that right fellow MSE-ers???

Best wishes to all, including those who don't agree with me..

Lodger

franklee

theartfullodger wrote: »

Did I get that right fellow MSE-ers??

Yep. Presumably the difference of opinion between you and clutton in posts #11 and #13 would depend on if the estate is below the threshold for inheritance tax or not. If above the threshold I agree with your post #13, except for the additional points below.

Of course there are a few more ins and outs which won't apply to tootsmyboots as the estate is below the threshold for inheritance tax. But while the subject is raised for anyone who does have inheritance tax to pay: If someone sells for less than the probate value (due to the falling market you can't just give it away), before the property is transferred out of the estate and within four years of the death, then they can probably claim back the overpaid inheritance tax. Also, especially useful if not selling within the four years, it's possible to challenge a probate value if you think the revenue have valued it too high and a good way to do this is to employ a surveyor to do it for you, including the negotiating with the tax man. I hope that gives some ideas to anyone else who has struggled to sell an inherited property in the falling market over the last couple of years.

tootsmyboots, I'm sorry for your loss, I think your FIL is correct that you can market the property.

Note I'm not an expert, just a layman who has been through some of this too,

tootsmyboots

Can I just thank everyone who has replied. This has been a very difficult time for me - I have just lost my only remaining parent and am 38 weeks pregnant as I type, so focussing on the practicalities has been my way of coping. It gives me something else to think about at this distressing time. I have no emotional attachment to the property in question, as it was not our family home - dad and I lived in a different house together for 20+ years prior to his move 2 years ago. It would be very different if it was my family home I was trying to sell. I know he would want me to deal with things practically to benefit his granchildren, so I hope no-one thinks I am being callous. I would rather live in a tent and still have my dad here, but have to deal with the circumstances as they have presented themselves.
TMB

tootsmyboots

Absolutely. My son (1 year old) and my new baby and my other half mean the world to me. I know my dad would want us to make best use of his property to benefit them. I would just rather he were still here and I did not have to consider this at all. I am just trying to order my thoughts and affairs before the impending haze of the new baby's arrival! Not long to go.

Also my FIL agrees that if we marketed it before the grant of probate is through (which is just about ready to be submitted) and someone put an offer on, they may withdraw if any complication arose (which is unlikely, but entirely possible) and this could lead the hosue to being on the market for a longer period which may cause people to think there is something wrong with it. And indeed the market is not wonderful as we all know. Someone will get a bargain compared to what dad paid for it two years ago, but it's all relative and not important in the bigger picture. My family comes first and up until a month ago this wasnt even an issue.

SouthCoast

Realistically priced properties will find cash or near cash buyers.

Good luck.