Advice on transfer of house from an estate?

STFU

Hello,

I'd like to ask for some support and help on handling an issue that arises from the death of my parents and handling the house that they left in their wills.

My parents have recently died, approximately a year apart. They were tennants in common, each owning 50% of the house. The house is part of their estates. Their estates are left in equal shares to me and my siblings. We are also all co-executors of the wills. Some of my siblings wish to end up with ownership of the house. Other siblings and me do not wish to do this and prefer to take cash in lieu. There is enough cash in the estate to cover the share of the estimated market value of the share of the house that my siblings wish to 'purchase'.

There is all sorts of "advice" floating around our discussions, none of it from any authoritative sources.

My question is about the best way to achieve this and minimise tax.

I can see three ways that the outcome might be achieved:

1) The executors sell the house on the open market and the siblings wishing to buy it do so by being the highest bidder. This could be done via auction or through an estate agent. The upsides of this are that it is indisputable what the market price is. The downsides are the estate agents charges and Land Transfer Tax (Stamp Duty, LTT).

2) The executors obtain an estimate of the market value of the house either from several estate agents or from a suitable qualified surveyor. The siblings then purchase the house from the estate at that value. The downsides of this are that this produces only an estimate of the true market value and, as such, is likely to be a mid-market price; Land Transfer Tax would also be payable.

3) Through either 1) or 2) above or some other method an acceptible, agreed value for the house is arrived at and the house is transfered into the name of the siblings wanting it and the others take cash in lieu. The upsides of this route are that Land Tranfer Tax is payable only on the proportion of the house that is transfered (not on the portion already 'owned' by those siblings). Well. This is the uncoroborated 'advice' that has been given already.

Another suggestion wrt CGT is that we can individually declare the house as our prime residence (and spend some time living there) before selling our individual shares thus avoiding CGT on that share. I guess that this applies to the siblings not wanting to retain any part of the house.

So, several questions:

1) are the above analysis and scenarios correct and complete?

2) the house is likely to be valued higher than the probate valuations so what is the implication for CGT for the estate and for the individuals concerned?

3) are there any consequences of the house being split 50/50 across two estates?

4) got any other thoughts or suggestions about how to achieve this in an effective way that minimises costs and tax?

Thank you for your help.

regards,
!!!!!!

BoGoF

Was probate obtained? If so, what was the property value in the probate as that will form the basis for any future CG calculations.

In all honesty this is far too complex an area for a DIY effort, you really need to get professional advice.

John_Pierpoint

How many siblings in total stand to share the house under the wills?

STFU

To answer those last two questions in one:

1) Probate is yet to be obtained. There are two separate valuations for the house for probate purposes. They reflect the change in value of the house between the two deaths.

2) Three siblings.

Also, I think that the Stamp Duty question is answered at taxationweb.co.uk. Search for "inherited property ....AGAIN!!". (As a new user I'm not allowed to post links yet). It seems to say that Land Transfer Tax is payable on the share of the value of the house that is transfered.

Wow. You guys are quick! Thanks.

!!!!!!

John_Pierpoint

!!!!!! wrote: »

1) Probate is yet to be obtained. There are two separate valuations for the house for probate purposes. They reflect the change in value of the house between the two deaths.

...........and the fact that only half a plot of land with a house on it was available for sale at the first death? (allowing a customary devaluation of 10% at Date of Death.).

The answer to this one is most likely to be "you need individual professional advice" but in the mean time I think we need additional information in the form of numbers.
Values of the property?
Values and type of any other assets?
Who inherited (for 12 months) after the first death? (...[Both] their estates are left in equal shares to me and my siblings. So the surviving spouse got nothing?!?)

Is there any inheritance tax (IHT) involved in either estate (ie value of everything owned (less debts) is still less than £ 312/325K for both (even the 12 month survivor) ?

Are we just considering SDLT (Stamp Duty Land Tax)?
&
Capital Gains Tax (CGT on any gain over probate valuations).

MotownFox

Were the wills both life interest in the property type wills? I only say that because that is usually why the property is held as Tenants in Common.
If that is the case then on 1st death the property would have only passed into Trust not to any beneficiaries. Under the Trust the proceeds go to the beneficiaries who take at the date of the Life Tenants death (i.e. the value at the date the 2nd one died)
The Trust AND the total free estate including the 2nd half of the property aggregate for IHT purposes and Tax is payable if the threshold is exceeded. So CGT only really becomes an issue if the value has shot up since the death of the 2nd to die.

So as mentioned above the values concerned are the relevant information needed to properly answer the question raised.
I would get proper valuations myself and ask the Solicitors what additional costs are relevant between selling and transferring and the difference between the 2 options. Certainly transfer would mean no estate agents costs would be involved except in doing the valuations.

STFU

Thanks for the help and questions. Here are some answers:

The wills were not life interest wills. The original wills were of that form but the solicitor advised that this was no longer a viable option for the mitigation of IHT. The first will did not leave anything to the surviving spouse. There were provisions in the will for loans to be made to the surviving spouse should they be required for support. There was no such need as the surviing spouse had sufficient funds to cover costs for the following 12 months until death.

The house was valued for probate purposes after each death. The values were each £300,000 give or take. For the first estate, 50% of that value was used. For the second estate, 50% was again used less 19% of the result (following advice from HMRC). There is no IHT liability for the first estate. There is for the second.

Other assests are mostly in the form of cash in various bank accounts and other savings instruments. The second estate also contained some shares. There was a forced sale of these shares due to a merger/acquisition.

I've been reading HMRC's CGT Helpsheet 282, Death, Personal Representatives and Legatees. If I understand it correctly, then the PRs will have a liability for CGT on the sale of the shares because they were efectively disposed of before the residue of the second estate was determined.

Also, if the house were to be transferred to the legatees in joint ownership there would be no CGT liability on the PRs. CGT would arise for the legatees as and when they dispose of their share of the house.

So I think that at least one of my questions reduces to:

If the PRs transfer the house to the siblings wanting to keep it and transfer equivalent cash to the siblings not wanting to keep it, will there be no CGT liability arising for the latter? I guess I'm asking if HMRC will accept this disposition of the estates rather than seeing it as an effective disposal of the asset that is then liable to CGT. By the way, there are no specific provisions in either will as to the disposition of the house. So I'm wondering if it can be treated like any other indivisible asset, such as a valuable painting, that is transferred to one of the legatees.

From Helpsheet 282 it seems that CGT will arise if the PRs sell the house even if it is to some of the legatees.

I think that the Stamp Duty situation is clear. The siblings receiving the property will have to transfer it into their names and the proportion of the value will attract Stamp Duty Land Tranfer tax.

I think that I have the position with respect to IHT clear.

Thanks again for your help with this.

!!!!!!

DarrenTMH

Hi !!!!!!

following on from your last comment above on the SDLT aspect, if this is the case then your siblings will be likely to benefit from using an SDLT mitigation service from a legal firm specialising in this area.

I've posted elsewhere in the forum on this subject, have a look at my other posts via the menu on clicking my username to find more info on this.

hope you find this useful and good luck with getting it all sorted

best regards

Darren Ferneyhough

John_Pierpoint

I am finding it very difficult to understand your quandary, probably because I don't know the actual numbers for the in's and outs and the various values of the assets within the estate.
I suppose a lot depends on the relationships between the siblings and their ages.

Are you still "in time" (2 years) between yourselves to create an instrument of variation for (your bits) of the wills to make them say what you would prefer?