Inherited Home - Capital Gains Tax?

morphy_richards

Also, approximately, how much would the legal fees involved in transferring ownership from the estate to the three of us be?
Thanks.

morphy_richards

Also, approximately, how much would the legal fees involved in transferring ownership from the estate to the three of us be?
Thanks.

googler

morphy_richards wrote: »

Also, approximately, how much would the legal fees involved in transferring ownership from the estate to the three of us be?
Thanks.

Should be a simple conveyancing job. It would be around £800 - 900 round my way. Get a few quotes from solicitors who routinely handle conveyancing round your way.

googler

morphy_richards wrote: »

Also, I'm a little confused as to when it is advantageous to sell the property as our mum's estate or when it would be better to transfer ownership to the three of us and then sell.

That depends on what the will says. If the will says the property will be sold and the three of you divide the proceeds, that's what the executor has to do. If it says the house is bequeathed to the three of you equally, you three have to sell it - but in practice, any competent solicitor, armed with the probate docs, will, etc should be able to do the conveyance to you three and the conveyance to the buyer in one go, if instructed by the executor.

Is one of you or all three the executor(s)?

TonyMMM

(Depending on the wording of the will) If you all intend to sell anyway , I would do it as the executor whilst it is part of the estate and then distribute the proceeds. It makes things simpler and helps to avoid potential fall outs.

getmore4less

morphy_richards wrote: »

Part of the issue is coming from the fact that the estate agent we paid to value the house for probate has undervalued it to the tune of 10k. (due to "tired" furnishings) in trying to convince him to change his mind as this has potential implications for CGT if we sell the place at or above its real value. He is under the impression that cgt and IHT are the same thing and what he has done causes us no problems.

You can value the house at any value you want for the IHT form.

You don't have to use the estate agent value

you need to be able to justify the value if HMRC query it so dont go to high, look at selling prices localy to get a guide for your valuation.
(remember that house values are vary variable)

If the estate is below the IHT nillrate band then you try to value high to reduce future CGT, if above so IHT is due on the low side to mitigate IHT as CGT is lower.

If you read HMRC pages there are some guides on what happens if you sell uickly and the probate valuation is out.

The estates gets a CGT allowance and if you transfer to the benificiaries you each get your own so there are ways to mitigate CGT.

00ec25

in summary your options are dependent on the wording of the will:

1) the executor sells the property in accordance with the stated requirements in the will. This means the estate (represented by its executor) is the "person" selling up, not the 3 of you as beneficiaries.

In this case the executor gets one £10,600 CGT allowance. This allowance covers all items liable for CGT in that tax year. Note that the executors CGT allowance is only available during the tax year of the death and for the following 2 tax years. If the sale takes longer than that, the estate loses any right to a CGT allowance at all

2) the executor distributes the property to the beneficiaries and the beneficiaries, ie the 3 of you, sell the property .

In that case, as you say, you have a 31,800 cushion in total assuming the will gives you equal shares and that none of you have used your own individual 10,600 allowance on anything else that tax year

NOTE
Be aware that whatever value you or the estate agent put down for probate purposes this has not yet been accepted by HMRC because no IHT has been paid and therefore HMRC have not yet agreed anything. Technically HMRC have not yet “ascertained” the probate value.

So, when you or the executor sell the property HMRC will then and only then decide if it accepts the probate value as your starting cost for the CGT calculation. HMRC will use professional valuers to advise it on the accuracy of the probate value and if they don’t like it then they will use their own valuation. If this is of concern to you then HMRC allow you to ask it, after you have sold it but before you submit the CGT calculation, to check if your value is reasonable to them.

There is a special form which you send to HMRC to request this valuation check http://www.hmrc.gov.uk/forms/cg34.pdf

morphy_richards

I've managed to explain the difference between IHT and CGT to the agent and he has agreed to revise the price upwards. Thanks for your help.

morphy_richards

@00ec25
Thank you very much. That is extremely helpful.