Another inheritance related CGT question.

iriskrell

Hello
My sister and I are executors for my late mother’s estate and also the sole beneficiaries. The terms of the will are a straight 50:50 split of the estate between us. The estate is below the inheritance tax threshold and consists of a house, some cash, premium bonds and items like jewellery and furniture.
We’ve obtained grant of probate and the house is on the market. My understanding is that if we manage to sell the house and items for more than the value declared on the inheritance tax form we may be liable for capital gains tax. From my limited understanding of this we each have a personal CGT allowance of £10600 each as beneficiaries. From what I’ve read it also seems the personal representatives of the estate have an allowance as well.
My question is do we also have an additional allowance in our capacity as executors and beneficiaries i.e. 4x£10600? Would it therefore be beneficial to sell some items while executors to use any exemption as the personal representatives and then dispose of other assets after they pass to us as beneficiaries to take advantage of that allowance?
Regards IrisK

dzug1

You misunderstand.

The estate (as a corporate entity) has a CGT allowance. The personal representatives do not have one (in their capacity as personal representatives). They just use that of the estate.

The beneficiaries have individual CGT allowances.

The timing of transfer or sale of assets can however be manipulated to maximise the use of all the allowances.

iriskrell

Thanks for your reply. So in effect there's 3 allowances, one for the estate and one each for us, the beneficiaries.:)

dzug1

iriskrell wrote: »

Thanks for your reply. So in effect there's 3 allowances, one for the estate and one each for us, the beneficiaries.:)

Provided you do it right, yes

getmore4less

How did you value the property, when under IHT you aim for as high as you can to reduce potential CGT issues, with a flat market it should have been possible to get a valuation high enough to avoid CGT issues


Also you have to watch for the 6 month ownership that many lender impose.

So if the potential buyer needs a mortgage and you transfer the property to yourselves they may have an issue.


For the rest of the stuff probably easiest to just take possesion and sell as individuals, when you can ignore most CGT issues..

premium bonds can stay in the draw for a year so if you want you can delay cashing these in. Prizes remain tax free so you can wind up everything else including the income tax.

John_Pierpoint

getmore4less wrote: »

Also you have to watch for the 6 month ownership that many lender impose.

So if the potential buyer needs a mortgage and you transfer the property to yourselves they may have an issue.

This is something new to me - I thought the Land Registry (even though they have been defrauded in the past) guarantee the title. [ie the tax payer pays for the fraud]

Can you explain a bit more why mortgage lenders don't trust the situation, especially as the borrower is paying good money to have the title double checked legally?

getmore4less

John_Pierpoint wrote: »

This is something new to me - I thought the Land Registry (even though they have been defrauded in the past) guarantee the title. [ie the tax payer pays for the fraud]

Can you explain a bit more why mortgage lenders don't trust the situation, especially as the borrower is paying good money to have the title double checked legally?

No idea but it comes up on the mortgage board quite often.

John_Pierpoint

Be aware that your probate valuation might be challenged if it has not (yet) been agreed with the Valuation Office Agency (still called the District Valuer by some) it is an inexact science.

https://forums.moneysavingexpert.com/discussion/comment/45675098#Comment_45675098

"Memorandum of appropriation" are the buzz words for making a note and telling yourselves that you now hold the property in a bare trust for yourselves, and thus can use two CGT personal allowances.

This thread explores the concept.

https://forums.moneysavingexpert.com/discussion/3469483

iriskrell

Thanks for all the replies.

The IHT valuation was from three separate estate agents who all quoted exactly the same figure! The neighbours seem to think it's under valued but from what I've seen on the internet for similar properties in the area it seems about right. It's on the market for about 25K above that price but it would be a miracle if anyone offered that.

getmore4less

iriskrell wrote: »

Thanks for all the replies.

The IHT valuation was from three separate estate agents who all quoted exactly the same figure! The neighbours seem to think it's under valued but from what I've seen on the internet for similar properties in the area it seems about right. It's on the market for about 25K above that price but it would be a miracle if anyone offered that.

They would, most people think plases are worth more till they become a buyer.

By the time you take the fees out and a price drop you will probably not have an issue.


Are you getting viewings.

John_Pierpoint

Did you have to spend any money on improvements, to get the property in a fit condition to sell?
These expenses would most likely be available to reduce the capital gain (if any).

My fairly recent experience was of getting some very hard nosed offers from developers and DIY improvers, but then suddenly several people wanted it at the same time.

In retrospect it was quite fun.

Did you feel the need to advertise for creditors? That exercise bought a few developer wolves to the door.