Reducing CGT on inherited house

anselld

TheRealGrumps wrote: »

anselld: "only on the gain since probate & gift." How is this calculated?

Probate value. (i.e. market value at date of death) £200k
You inherit at £200k (base cost for CGT)
You gift immediately to children at market value (£200k)
Your Capital gain is nil ( Market value of gift - base cost)

Children receive gift at your base cost (£200k)
Children later sell for £300k
Children Capital Gain = £100k - selling costs.
(unless it is their main residence)

TheRealGrumps

Ah. I got the wrong end of the stick when reading about CGT earlier.
I assumed that the property value when I inherit would be £0, but it is actually the market value.

So my children's CGT liability would still be £0 if they sold later at a profit if it is their main home.

SeniorSam

The RealGrumps ........ Once you inherit the house, it is an asset of yours. Passing it to your children is therefore a 'GIFT' from you of £200k. That value would remain part of YOUR estate for 7 years.

That's why Mojisola suggested a Deed of Variation in your reply #3. That action would make the gift from the one who died and not you.

This may have a bearing on your own estate taxation. If you have an estate in excess of £325,000 (including the £200k house you are inheriting) then the Deed of Variation would be a better way.

Do you understand that?

Sam

TheRealGrumps

Thanks SeniorSam (and others).
That makes sense to me.

TheRealGrumps

One final question, and maybe it should be a new topic.
The DoV in this instance should not be too complicated. I have seen one or two examples on the web, and other people saying that it really should be drawn up by a solicitor.
When signed, the DoV should be kept together with my will?

Mojisola

TheRealGrumps wrote: »

I'm due to inherit a house (value is under the IHT limit) and want to gift it to my children.

TheRealGrumps wrote: »

O
When signed, the DoV should be kept together with my will?

The DOV should be kept with the paperwork of the will that's being altered.

The variation changes the other person's will so that you don't inherit the house so the house is nothing to do with your estate.

TheRealGrumps

Thanks.
I haven't read all of the probate application form notes yet, but should I send the DOV together with the will?
Does the probate office (or whatever it's called) hold a copy of the will that I send them, or is it all returned to me?

System

I think a DOV alters the will of a deceased person, in effect all the beneficiaries get together and agree amongst themselves to repool the decease's assets and redistribute them in an agreed way.
I don't think it can exist in advance of someone's decease, because there would not at that stage be a will to vary. It's not like a codicil.

It's not clear from the OP whether this death and potential inheritance has already taken place, or whether it is being anticipated.

SeniorSam

When the Will is submitted, the original is always kept and a copy returned.

Sam

Mojisola

Clifford_Pope wrote: »

I think a DOV alters the will of a deceased person, in effect all the beneficiaries get together and agree amongst themselves to repool the decease's assets and redistribute them in an agreed way.

Only beneficiaries whose inheritance would be affected by the change have to agree.

Minors can't agree to any changes to their inheritance.