A very long, despairing post

Savvy_Sue

OK, the solicitor is NOT the executor. He is therefore acting on 'your' instructions - ie instructions of the executors. So you can, I believe TELL him to accept a valuation. He can advise you that he thinks it's too low etc, but he is supposed to act on your instructions, within the law.

Someone will correct me if I'm wrong on this.

Are you all acting as executors, or has the one in Australia opted not to act, or to have power reserved?

burnoutbabe

Gingernutty wrote: »

That's reassuring.

However, the rent is income even if we don't see it ourselves - it's parked up in an account the solicitor has access to even though it's ours - but it's not ever going into our bank accounts - it's being saved to pay for the solicitor and the inheritance tax.

Even if we don't directly benefit from this income, we'll be spending it (on fees, taxes and interest) and so we still have to pay tax on it.

well i think its actually the estates tax liability, not yours. The estate is getting income from the rental and therefor owes the tax. Which is the same as before dad died, tax is owed on the rental income.

So don;t get so het up about the income tax, its covered by rental income.

Scorpio33

To me there are two issues here, which need to be dealt with seperately. One being the will, and the second being where Brother 1 lives.

With the will, agree on how much each property would sellfor (www.mouseprice.co.uk). The work out the debts, taxes etc owed, and divide by three to get each persons "share". That then gives everyone an idea to their "entitlement" according to the will.

Then with the second issue, brother 1 would need to work out what he can do with the shortfall between what he is entitled to and the selling price of the flat. If he can afford to mortgage then fine. If he can't afford this, then he can ask you and brother 2 to buy the house with you, and him pay you rent for your share, but that should never be expected. If you don't want to buy the shortfall for him, then that is your right.

Obviously you and brother 2 would not wish brother 1 and family to be homeless, but it is not up to you to accomodate him if he can't afford to live where he wants to.

Equally, you could turn around and say yes brother 1 is owed money, but equally, the estate is also owed 21 years back paid rent, which at market value would probably take away a vast chunk of his inheretance. Then again, he could claim squatters rights, and as he has done up the property, then he could be entitled to 100% of the value of the property. The key is to be fair to each other, and the only way is to work out each others share prior to anything else happening, and then to decide indiviudually what you want to do with it.

So what I suggest is this; meet both brothers (and possibly solicitor) in a mutual place (ie: Somewhere you can all feel relaxed), work out each others share, and then discuss what each of you want to do with it, and then if you want to assist brother 1 in some way.

Travelqueen

Just to jump in, I think the the tax on the rental income will only be payable in January 2014 if it's from after April (tax year 2012-13), and rental income before that (i.e. tax year 2011-12) will be due in January 2013.
As another poster said, the tax is due on the income at your standard tax rate 20 or 40% so unless your outgoings for the flat are more than the rental I wouldn't worry too much. Equally, there are deductions you can account for, wear and tear at 10% of the rental income etc etc
Good luck sorting everything out.

BitterAndTwisted

Eh, until probate is concluded and the three siblings inherit their shares, any tax due on the rental-income will be paid from the estate. That is why the solicitor is receiving the rent.

Gingernutty

The tax liability belongs to the estate for now but we will have to declare income after the probate is settled.

The solicitor is acting on our instructions but can only do what the will tells him to do.

It's already a massive relief to know that it's not CGT but income tax payable but..

a) Brother 2 is a high earner and is probably going to have to pay tax at 40% on money he'll never see

b) I'm resenting the fact that I'm going to pay income tax on any rental income I'm not going to see.

I'm still trying to word an email to Brother 1 that doesn't involve swear words and just sticks to the facts.

Thanks for all your input, guys.

At least I know it's not just me.

RAS

Gingernutty wrote: »

It may not have been Dad's intention, but they have put up a lot of cash not just to do up the flat for renting but Brother 2 has shelled out money for Dad's nursing home fees when Dad's savings ran out..

Why????????????

these should ahve bene paid by Social Services - based on his assets at the time, they would ahve put a charge on the flat or house.

Or was someone trying to avoid that becasue they did not want Social Services involved checking his assets?

You do NOT pay CGT on rent. You do pay income tax however. I assume the rental income should currently be going to the estate and they should be paying any tax from it?

peachyprice

Why won't you see the income from the rental? As soon as probate is settled the income becomes yours/your brothers.

Where is the income going to go once it stops going to 'the estate'?

Gingernutty

RAS wrote: »

Why????????????

these should ahve bene paid by Social Services - based on his assets at the time, they would ahve put a charge on the flat or house.

Or was someone trying to avoid that becasue they did not want Social Services involved checking his assets?

You do NOT pay CGT on rent. You do pay income tax however. I assume the rental income should currently be going to the estate and they should be paying any tax from it?

Brother 2 was the Deputy of the Court of Protection and was blundering a bit in the dark.

At the time Dad went into the nursing home, his savings (which included some compensation for an injury he sustained in an attack) already put him beyond the threshold for SS help, let alone the value of his properties - the nursing home demanded prompt payment and were threatening legal action if the money was so much as a week late - so Brothers 1 and 2 both helped out.

peachyprice wrote: »

Why won't you see the income from the rental? As soon as probate is granted the income becomes yours/your brothers.

Where is the income going to go once it stops going to 'the estate'?

Thanks to Brother 1's proposed plan to repay the Inheritance Tax in instalments, the rental income is going into one account which will be used to pay the tax, the solicitor and any fees.

So it's not going to be split three ways between us and we'll never actually see the money we'll be paying income tax on from our existing incomes.

RAS

But that is not going to happen is it?

The solicitor needs to execute the will. Given that there is nothing saying brother 1 will get either property, the only way to execute the will is to sell both properties.

You say the solicitor did no like the valuation? why?

is he trying to reduce either inheritance tax laibility by getting a lower valuation? or reduce any subsequent CGT liability by getting a higher vaulation?