Inheriting house - how does it work?

kelloggs36

Just wondering, we have a mortgaged house in which we live. We have been left a house in a will which is to be sold and the proceeds to be split between my sister and I. Would I be liable for 40% tax as it isn't my principle residence, or it is treated differently as it is an inheritance? The value is way below the inheritance tax threshold.

Also, if a will states that the house is to be sold, is there anything from stopping either my sister or I buying the other out for their half?

Mojisola

If the will is worded that the property must be sold and the proceeds divided between you and your sister, you won't ever be the owners of the house, just beneficiaries of the money raised by the sale.

If one of you wants to buy the house, you buy it from the estate, not from the other sister.

If the will leaves you both the house and you've decided to sell it, then that's a different matter.

CLAPTON

the acquisition price will be the value at the time of death
so assuming the property is being sold shortly after the death then the 'gain' will be zero and so no cgt to pay

John_Pierpoint

Be careful about this one.
You might manage to sell the house for more than its agreed probate value.
Is there any IHT on this estate? If there is you might find yourself selling at a loss and recaiming some of the 40% IHT.
Depending on what the will instructs the executor to do, it could make sense to transfer the house into your joint names and then sell it, as you personally have nil rate bands for CGT that are bigger than the CGT relief available to the trustee (executor).
(If you and your sister agree, you could add a deed of variation to the will and thus change it; but that would cost several hundred pounds.)

My sister and I did this with my mother's house, if nothing else the cost of the transfer (just filling in a form and sending it with a fee to the Land Registry) was probably recovered by making the job of the conveyancing solicitors simple.