Selling Property

ian912

We have a father, mother, son A and son B.

In 1986, father and son A buy a property (joint tenancy) and begin to live there with the mother. Son B doesn't live there.

Son A moves out in1999. The mother and father continue to live in the property.

The father dies in 2001 and son A becomes sole owner under the joint tenancy. First question(s) - does son A "inherit" the father's share and be subject to IHT if above the threshold? If the value of the father's share is below the IHT threshold, does this mean there are no tax implications at this stage eg CGT, and presumably son A is deemed to have acquired the father's half-share at the then market value?

The mother continues to live in the property rent free.

In 2002, son A gifts 50% of the property to son B. Presumably son B "acquires" this at the then market value (and son A "sells" at this value for CGT purposes)?

As part of the transfer to son B, a clause in the deeds states that the mother can live in the property rent free until she dies.

The mother dies in 2007 and the property is sold in (June) 2008. What are all the tax implications for the two brothers from the death of the father in 2001 until the sale of the property in 2008? Did the mother's right to reside in the property from 2002 have any bearing? Thanks - Ian

SeniorSam

ian912 wrote: »

We have a father, mother, son A and son B.

In 1986, father and son A buy a property (joint tenancy) and begin to live there with the mother. Son B doesn't live there.

Son A moves out in1999. The mother and father continue to live in the property.

The father dies in 2001 and son A becomes sole owner under the joint tenancy. First question(s) - does son A "inherit" the father's share and be subject to IHT if above the threshold? If the value of the father's share is below the IHT threshold, does this mean there are no tax implications at this stage eg CGT, and presumably son A is deemed to have acquired the father's half-share at the then market value?

The mother continues to live in the property rent free.

In 2002, son A gifts 50% of the property to son B. Presumably son B "acquires" this at the then market value (and son A "sells" at this value for CGT purposes)?

As part of the transfer to son B, a clause in the deeds states that the mother can live in the property rent free until she dies.

The mother dies in 2007 and the property is sold in (June) 2008. What are all the tax implications for the two brothers from the death of the father in 2001 until the sale of the property in 2008? Did the mother's right to reside in the property from 2002 have any bearing? Thanks - Ian

........ Do you have details of the other assets the father held in addition to the home and the mothers assets as well as the details of the Will the parents made?

I must agree this sounds like someone wanting answers to an exam question rather than trying to work it out themselves, but apologies if this is not so.......... just the way you worded your question!

Sam

ian912

Didn’t expect those responses! Not sure to take them as compliments or otherwise - just kidding!!

I read a lot of posts on the site and frequently there’s not enough info whereby respondents have to ask questions.

So I decided to lay it out carefully and try to include everything. Ironic then that I DIDN’T include everything. .... "Do you have details of the other assets the father held in addition to the home and the mothers assets as well as the details of the Will the! – parents made?"

This is a real family situation. The estates of the parents were negligible and of no relevance (other than the small house). Also there were no wills.

I’d be grateful for any comments please!

Thank you for your responses - Ian

BritRael

ian912 wrote: »

....I’d be grateful for any comments please!

Thank you for your responses - Ian

I've only got one; use a bigger font!! :rolleyes:

00ec25

jimmo wrote: »

Legally, Son A does not inherit his father’s interest in the house. The father’s interest in the house simply disappears on his death.

interesting, I have no legal background so don't know about tenancy, but it appears therefore that a joint tenancy is a good way to avoid IHT in the case of intestacy? (Although hardly an elegant bit of IHT planning)

Obviously son A had to pay to buy his 50% but even so he then "inherits" the other 50% tax free, whereas under intestacy the first 250K and 50% of the residual would have gone to the mother, and having 2 sons, then son A would only have inherited 25% of the residual, quite a different outcome from getting the whole houe while his brother gets nothing?

BritRael

00ec25 wrote: »

interesting, I have no legal background so don't know about tenancy, but it appears therefore that a joint tenancy is a good way to avoid IHT in the case of intestacy? (Although hardly an elegant bit of IHT planning)

Obviously son A had to pay to buy his 50% but even so he then "inherits" the other 50% tax free, whereas under intestacy the first 250K and 50% of the residual would have gone to the mother, and having 2 sons, then son A would only have inherited 25% of the residual, quite a different outcome from getting the whole houe while his brother gets nothing?

Like you, I have no legal background, but I do own a property in this way; me and my OH bought our home as TIC (with 75/25 split in my favour).

However, in my will, I have left my part to my OH (would this be called 'inherits'?). I did this so that she will be secure in our home if I go first and my part of the property would not be part of my estate which I have left 100% to my mother (that was the theory anyway! )
It would be a bit ironic, if I go first and then she had to sell up anyway as she couldn't afford IHT! :rolleyes:

ian912

Thanks everyone! I am son B and this is a real situation! I was just trying to make the situation as clear as possible.

There is no IHT involved as the property value is way below the threshold.

However, I'm concerned about myself and CGT.

It was a council property in which the family lived from 1966 and was purchased in 1986. My parents lived there since 1966 until they died. My dad was born 1920 and my mother (Murphy's Law) was born LATE April 1923.

The 50% transfer to me and my mother's right of residence were my dad's (verbal) wishes.

So please Jimmo, can you elaborate on.... "I see some scope for tweaking this a bit especially in relation to the mother’s right to occupy. Did her right to occupy actually exist before it was committed to paper in the deed of gift from Son A to Son B?
How that would affect the overall picture probably depends on Son A’s potential ability to utilise Dependant Relative Relief and whether there is a potential knock on effect on Son B’s acquisition value."

Thanks to all for your help! Ian

ian912

Thanks to all (especially Jimmo)!!

Ian