capital gains on inherited house

dlk

My Mother who is the beneficiary of my Grandparents estate (of about £30k savings and a home worth £120k) is looking to sell the house. The solicitor doing probate (who's bill is already over £5k!!!) says that if she doesn't sell the house through them as part of the estate my mother will have capital gains tax to pay as a second home. My question is, surely the capital gains base will be the current value of £120k so if sold at around that level no gains, surely the capital gains base price wouldn't be what my grandparent paid ten years ago as it has always been a main home. Am I wrong in this? I am getting the impression this solicitor is starting to take the urine as there is apparantly still more invoices to come as well as the current £5k total (No letter was ever received to explain the charges up front although we did get one when my grandfather died 3 years earlier which had a maximum limit of £2000 + vat)

puddy

i dont know enough to really comment except to say that my understanding was that the limit was the limit no matter how you sold the house, and as its under the limit she wouldnt pay the tax, but someone more knowledgable will be along to confirm or put that right

the solicitors fees? well it certainly sounds very high to me, has there been a break down to explain the costs? i dont really know how much probate costs though

Old_Wolf

The "original cost" of the property to your Mother is deemed to be the value on the date she inherited, so while in theory she has to pay CGT as it isn't her private residence, unless the property rockets in value between now and the date of sale there will be nil to pay. Not sure why the solicitor would say otherwise, the rules don't change based on who deals with the paperwork. If you think the charges are high I would request a breakdown before paying.

mlz1413

dlk wrote: »

My Mother who is the beneficiary of my Grandparents estate (of about £30k savings and a home worth £120k) is looking to sell the house.

The solicitor doing probate (who's bill is already over £5k!!!) says that if she doesn't sell the house through them as part of the estate my mother will have capital gains tax to pay as a second home.

My question is, surely the capital gains base will be the current value of £120k so if sold at around that level no gains, surely the capital gains base price wouldn't be what my grandparent paid ten years ago as it has always been a main home.

Am I wrong in this? I am getting the impression this solicitor is starting to take the urine as there is apparantly still more invoices to come as well as the current £5k total (No letter was ever received to explain the charges up front although we did get one when my grandfather died 3 years earlier which had a maximum limit of £2000 + vat)

Sorry I had to break your post up there's just too much info!

I believe CGT is paid by the person receiving a gain on an asset, and inheritance tax is paid by beneficiaries of estates.

so the sale of the house as part of the estate should only incur IT, unless the deeds to the house have already passed to your mother, which I assume they haven't as the estate is still with the solicitors.

If CGT is due it (for some reason) the cost will be deemed to be the market value when the asset was transfered - ie a documented valuation should have been done at the point when probate started. If that is in the last 3 years I can't imagine the increase will be more than the annual exemption of £10,100 for this tax year.

Your solicitor sounds very confusing so I would ask them to send a breakdown of work currently completed, ensure it has dates and summary of work so that you can ensure you have not been charged twice for any item.

clutton_2

sounds to me like the solicitor is taking the mickey..... tell him you want to move to a different solicitor.....

i had a solicitor try it on like this when my dad died, i told him to send the documents to another solicitor and he refused unless i paid the bill... i threatened to report him to the law socity and he sent the file across that day

Old_Wolf

mlz1413 wrote: »

so the sale of the house as part of the estate should only incur IT, unless the deeds to the house have already passed to your mother, which I assume they haven't as the estate is still with the solicitors

Inheritance Tax (if it was due, which it wouldn't be on an estate of that size unless there are sizable other assets not mentioned) would be chargeable on the market value of the house and other assets when it passed to the beneficiary, regardless of whether the house was sold or kept.

Capital Gains Tax would then become payable on the date of sale of the house, on the gain of the proceeds less the market value on the date of inheritance (less relevant costs) which I agree would seem to mean nil payable.

dlk

Thanks all, it was just capital gains I was referring to and checking the purchase price used for capital gains tax was the £120k it was valued at, at the start of probate. I assumed that was the case so thanks for clarifying and as there'll be no profit above this capital gains tax is irrelevant like I thought.

Thanks again

chappers

the solicitor is just trying it on ,by trying to create more work for himself.
As has already been stated the gain would only be that between probate and sale and not the original value of the property.

timmyt

dlk wrote: »

My Mother who is the beneficiary of my Grandparents estate (of about £30k savings and a home worth £120k) is looking to sell the house. The solicitor doing probate (who's bill is already over £5k!!!) says that if she doesn't sell the house through them as part of the estate my mother will have capital gains tax to pay as a second home. My question is, surely the capital gains base will be the current value of £120k so if sold at around that level no gains, surely the capital gains base price wouldn't be what my grandparent paid ten years ago as it has always been a main home. Am I wrong in this? I am getting the impression this solicitor is starting to take the urine as there is apparantly still more invoices to come as well as the current £5k total (No letter was ever received to explain the charges up front although we did get one when my grandfather died 3 years earlier which had a maximum limit of £2000 + vat)

as a solicitor in this area:

1. who is the executor? they should have agreed any charges and the lawyer should have stated what they were upfront
2. £5k need not be high, but it sounds as though from the level of assets that excess charging has gone on. The executor needs to consider a challenge
3. your mother takes the property at the date of death valuation. she can:
a. sell in her capacity as executrix if she is the executrix - and she has no reason at all to use the same lawyers
b. have the executor first assent into her name and then she sells as the owner. That seems uneccessary if she is the executor as that will attract a Land Registry fee, and she might as well just sell as executrix.

Has the value gone up much, as you then check who has the highest CGT exemption, a PR or an individual.

Happy to provide more info