CGT and Inheritance Tax on property

getmore4less

drip feeding info


any more gifts/loans in the past 7 years

Biggidy

He remortgaged the house to pay my sister £60k.

I'm drip feeding info because you guys are asking questions, I initially only wanted to clarify CGT.
As you can see the situation is a little complicated and I need to clarify what is best for me.

booksurr

Biggidy wrote: »

As you can see the situation is a little complicated and I need to clarify what is best for me.

what is best for you is not to drip feed info

you say you have a solicitor, I say that solicitor appears not to understand CGT but may appear to understand IHT however that solicitor is presumably aware of all the facts you have not yet told us and is therefore better able to advise than the position you place us in

the 60K "paid" to your sister is either an outright gift or it is a repayable loan, either way given the timing so close to his death, it will be added back into the value of his estate so in ball park terms we now have: house 630k + savings 8k + repayable loan or outright gift 60k + chattels 0.5k - mortgage 60k - funeral 5k = estate value £633,500 which is relatively close to the IHT threshold and would only take the VOA to disagree with the 630k value by "a bit" for you to be facing an IHT bill

getmore4less

Biggidy wrote: »

Good question.

The 60k remortgage was given by my father to my sister as a deposit to buy her house just before he died. She was paying him back alongside her own mortgage.

Obviously my sister will be paying this back out of her own half of the inheritance and I assume she will have to pay tax on this also.

Hope the mortgage lender was aware of this loan.


They usually require written confirmation if she told them it was a gift.

zygurat789

zagfles wrote: »

How do you work that out? The max the OP could put into his pension is his earned income ie £31k, he'd get basic rate relief on that plus 10% less CGT on the amount as it'd give him more basic rate band to use against the GCT, so 30% tax relief total. So HMRC would pay less than half what the OP pays into it. Or have I missed something?[/QUOTE]

post #13...

zygurat789

The question which needs answering is Where did your father get £60,000 from to lend to your sister?
It is important because if it was a loan to your sisister out of a remortgage your father received from a bank or bs etc then the £65k has to reduce the value of his estate because it is a liability.
If the £60k was a loan to your sister out of monies your father had then the £65k has to increase the value of his estate as it is a loan from, and, therefore an asset of his estate.

Biggidy

zygurat789 wrote: »

The question which needs answering is Where did your father get £60,000 from to lend to your sister?
It is important because if it was a loan to your sisister out of a remortgage your father received from a bank or bs etc then the £65k has to reduce the value of his estate because it is a liability.
If the £60k was a loan to your sister out of monies your father had then the £65k has to increase the value of his estate as it is a loan from, and, therefore an asset of his estate.

My Father re-mortgaged his house to give my Sister £60k for a house deposit, he wrote a letter saying this was a gift (not a loan), although my Sister was and is paying the bank back.

This is a difficult situation for me, because it will affect my CGT on the property - which is unfair to myself.

When my Father re-mortgaged his house it was valued at £525k and my Sister took £60k. Could I then argue that she has already taken a % of the property (estate) and I am due a higher percentage?

Biggidy

booksurr wrote: »

what is best for you is not to drip feed info

you say you have a solicitor, I say that solicitor appears not to understand CGT but may appear to understand IHT however that solicitor is presumably aware of all the facts you have not yet told us and is therefore better able to advise than the position you place us in

the 60K "paid" to your sister is either an outright gift or it is a repayable loan, either way given the timing so close to his death, it will be added back into the value of his estate so in ball park terms we now have: house 630k + savings 8k + repayable loan or outright gift 60k + chattels 0.5k - mortgage 60k - funeral 5k = estate value £633,500 which is relatively close to the IHT threshold and would only take the VOA to disagree with the 630k value by "a bit" for you to be facing an IHT bill

We have a good Solicitor who is aware of all the facts and she will also be using an accountant.

I have contacted you guys to get a better understanding so I know what questions to ask. All the facts I have now told you, I think the £60k loan/gift is a confusing part as I know my Father and Sister do not want it to directly affect my part of the inheritance.

getmore4less

The gift makes no difference to the CGT situation.


As it was a gift she does not need to pay it back and it no longer a dispersible asset of the estate although does need to be included for the IHT assessment(negated by the mortgage debt).

booksurr

Biggidy wrote: »

My Father re-mortgaged his house to give my Sister £60k for a house deposit, he wrote a letter saying this was a gift (not a loan), although my Sister was and is paying the bank back.

so on paper your father said it was a gift but in reality it is a loan?

- on paper it would now appear to be a loan not a gift so very misleading as to the real intention behind father's "gift"
- as sister has been "repaying" then the outstanding amount of the loan (and the underlying mortgage) cannot be 60k since repayments have been made either by your father paying off his mortgage using money she paid to him or your sister paying money directly into your father's mortgage account

Biggidy wrote: »

This is a difficult situation for me, because it will affect my CGT on the property - which is unfair to myself.

as we have already said several times the 60k has no effect on your CGT
CGT is based on the property values, an outstanding mortgage has no impact on the property value

Biggidy wrote: »

When my Father re-mortgaged his house it was valued at £525k and my Sister took £60k. Could I then argue that she has already taken a % of the property (estate) and I am due a higher percentage?

no you cannot
the laws of intestacy apply to the value of the estate at the date of death and you and sister will get equal shares of whatever that value is. Any gifts made before death have no effect on the % you are entitled to "take"

if treated as a gift then the full 60k is added back into the value of the estate but is immediately cancelled out by the outstanding mortgage of 60k, (albeit that a small amount of mortgage must have been repaid so it cannot be exactly 60/60) so the net effect on the value of the estate will be minimal increase in estate value

if treated as a loan then the remaining amount of the loan is added back into his estate as an asset of the estate. However the estate still has to settle the mortgage so the net effect is as above 60/60 or close to it.