Buying out brother's share of property after Probate

alright

Dear Fellow Forumers

I desperately need your advice about an inheritance tax/ probate issue.

My mother passed away in 2013 and we are coming to the end of the probate process.
My two younger brothers and myself are executors and sole beneficiaries of her will (myself includes my children who are toddlers). She left a property for myself and one of my brothers (we will call him brother A) to share.
Brother A has asked me to 'buy' his share of this property, so that he can then use the money as a deposit to purchase his own residential flat at a later date. The property currently has no mortgage.

I have my own existing residential mortgage, where I live with my husband and children. I am not able to re-mortgage this property as I did so just before my mother's passing and my husband is currently working as a locum.

Brother B and I were bequeathed another property. However, this property was leased to the local council and the previous tenant, has all but destroyed the property. We have had numerous quotes from builders and surveyors (a couple of whom are family friends). The quotes have ranged between £75 to £100k to get the property up to a habitable standard (damp, rotten floor boards, damaged kitchen, damage to bathroom, damaged internal doors and walls etc). This property has a buy to let mortgage on this, but due to the level of damage we have been advised that it is unlikely that we will get a remortgage to use for the repairs.

The currently plan (once probate has been granted) is to remove brother A's name from the Land Registry, obtain a mortgage for the first property, in order to give this to brother A, for his share and to repair the house shared with brother B.

My questions are:
Can I get a mortgage (in order to buy my brother's share) without brother A removing his name on the Land Registry?
If I can get a mortgage, will it be possible for me to get enough to complete the renovations on the other property?
Will there be additional tax to pay if I buy my brother out and if he receives the money? (income tax or capital gains tax)
The first property was valued at £400,000 - so I will need a mortgage of about £275,000
Both bothers have gone back to full time education in order to change careers, so none of them are in a position to help financially. They are also both unmarried.

Any advice that you can give will be very much appreciated.

xylophone

However, this property was leased to the local council and the previous tenant, has all but destroyed the property.

Should the council ( or their insurers) not pay for making good?

Why not simply sell property A so that your brother can receive his share?

You can then use your share as you wish?

You transferred the unmortgaged property out of your mother's name into your and your brother A's name?

The property has never been his or your PPR?

https://www.gov.uk/capital-gains-tax/overview

alright

Hi Xylophone

Unfortunately under the contract that my late mother signed with the council, they are not liable for any damages.

We want to keep property A as it was the home that we all grew up in.

The property is still currently in my mother's name as we are still going through probate, but will be in brother A and my name after probate.

Land_Registry

Can I get a mortgage (in order to buy my brother's share) without brother A removing his name on the Land Registry? - the registered owner/proprietor would have to be included in any Mortgage deed in order to 'charge' the property.

So if Brother A is the registered owner then he + anyone else can mortgage the property. It does not work in reverse.

The other questions are not part of the registration process so best dealt with by other posters

xylophone

If you are mortgaged up to the hilt (on your home and presumably on the damaged buy to let with brother will you be able to afford repayments on a mortgage for the unmortgaged property?

And how is brother B to afford his share of the buy to let mortgage?

Would you consider selling the damaged property? You might find a builder to take it on. You could try selling at auction.

Obviously you would want to cover repaying the mortgage with as much over as you can get.

You and brother B might then be able to buy out a percentage of Brother A's interest in the family home, possibly enough to cover a deposit for a property of his own?

Linton

alright wrote: »

.....
We want to keep property A as it was the home that we all grew up in.

.....

Suggest you really think this through. One can appreciate the emotions involved but it may be financially a very poor decision to keep something that expensive as a shrine to the past. You and your brothers need to focus on the assets that are needed now. It may be a better decision to sell both houses, split the proceeds and move on in a much more secure position than you all are now.

alright

Thank you. We are worried about paying capital gains tax, which I think we may need to, if we sell the properties. Can someone confirm this please?

Linton

Any CGT would only apply to the gain in value after deduction of expenses over a short period between probate value and sale, so I cant see it being significant and should be covered by your annual exemptions.

alright

Hi Thank you for your response.

During probate property A was valued at £410,000, we knew that they had undervalued the property, as they used an out of city surveyor and only did a drive by valuation, however a house in a similar condition on the adjacent road sold for £600,000 in December 2014.

Property B was valued at £200,00 by the same surveyor, however it needs a lot of work to make this habitable. Even so, this is the only 3 double bed property on the road as it is on a corner plot. A 2 bed property, which was slightly expanded to include a third box room sold in November 2014 for £350,000.

Can you please estimate the possible CGT that may need to be paid please?

CLAPTON

alright wrote: »

Hi Thank you for your response.

During probate property A was valued at £410,000, we knew that they had undervalued the property, as they used an out of city surveyor and only did a drive by valuation, however a house in a similar condition on the adjacent road sold for £600,000 in December 2014.

Property B was valued at £200,00 by the same surveyor, however it needs a lot of work to make this habitable. Even so, this is the only 3 double bed property on the road as it is on a corner plot. A 2 bed property, which was slightly expanded to include a third box room sold in November 2014 for £350,000.

Can you please estimate the possible CGT that may need to be paid please?

you seem to have deliberately committed fraud by under-declaring the value of the estate

HMRC may take a view about this

xylophone

http://www.burges-salmon.com/Practices/private_client/News/7544.aspx
might be worth a look.