Do I need to transfer mortgage to my name to sell house and will I need to pay CGT?

Manboy

I am currently dealing with my father's estate. He died at the end of December and named myself and my 2 siblings as executors. He left a significant sum of cash in some accounts and a house with a mortgage (about 25% of the house value)

I dealt with Probate myself and now I have the grant in my name with my siblings keeping 'power reserved'. I was able to transfer an allowance from my mother,who died several years ago, so although the estate value is a nice amount (even when distributed to all the beneficiaries) there is no IHT to pay.

I have two issues that I need to clarify

1 - IHT and CGT
I am concerned that we may have 'inadvertently' created a liability for capital gains tax. When submitting the probate forms I got 3 house valuations and stated the highest value, assuming that this would was the 'safest' option. We put the house on the market at the highest value to test the market - assuming that we would be lucky to get that amount (note the last time a house was sold in that street was in 2006 so not much to go on really) but we immediately had several offers at the asking price and a bidding war soon broke out. In the end we have accepted an offer that is surprisingly higher than the original price we asked.

So:
- Are we going to have to bite the bullet and pay CGT on the difference or is it likely that HMRC will buy our story that we were simply 'lucky' to sell at a higher price than everyone expected?
- If they determine CGT is due, is it the the estate that is liable for the tax or the individual beneficiaries? What allowance/s can be used? (There are three beneficiaries)
- Should we even tell HMRC about the difference in value given that the new value is still below the IHT threshold given the transferable allowance?


2 - Mortgage
Now that I have shown them the the grant of probate the mortgage company, now that they will actually talk to me, seem to be telling me (in vague terms) that I need to transfer the mortgage from my father's name into my name or I may have 'complications' when I come to selling the house. Given that we have already had an offer on the house and the contracts are already being drawn up by solicitors, searches being done etc is it really necessary for me to transfer the mortgage to my name? It seems a lot of faff and surely it's the estate that owes the mortgage, not me?

Hope that all makes sense


Many thanks

SeniorSam

There is normaly an alowable period in which to sell, but best to have a word with the Probate office. As the asset is to go the three beneficiaries, there would be three CGT allowances to offset against any gain if the Revnue do go the CGT route, but I feel that they wont.

If you explain to the mortgage company that a sale is imminent and the Executors are aware that the mortgage is to be paid from the proceeds of sale before distribution, there should not be a problem. The mortgage company will have a charge on the property, so they know their mortgage is safe. It does not have to go into someone elses name, but is a debt that the executors need to honor before any distribution and before the property can be transferred to a new buyer. No point in registering in your name and then the buyers name.

The sale can be a straight transfer to the new buyer once all documentation has been completed and the solicitor dealing with the sale will be familiar with all of the above.

Sam

Manboy

Thanks - that all fits with what I thought about things.

I'll give the probate office a call to see what they say

RAS

I would ask the mortgage provider if they have a "bereavement" department or officer. That person may be a bit more sensible.

Manboy

RAS wrote: »

I would ask the mortgage provider if they have a "bereavement" department or officer. That person may be a bit more sensible.

It was them who have been 'vague' about this. In a letter it says:

"Due to the mortgage being held in the late XXXXX's sole name you may need to arrange a Transfer of Mortgage Property appointment with your local branch to amend the title of the mortgage. Please contact your local branch to amend the title pf the mortgage who will be able to assist you. Please note you will need to take in the original Grant of Probate to amend the title of the mortgage.

Until I receive your instructions the mortgage will remain held in the name of XXXXXX and this could result in complications upon any future sale of the property"

So I phoned them for clarification, explaing a sale was imminent and they just suggested I need to talk to a mortgage advisor in branch. So I have an appointment in the local branch in a couple of days...

Manboy

Looking another bit of text on docs from the Probate office I have found this:

Alterations to the estate
If you did not have to complete a full account (e.g. if you were allowed to complete an IHT205) and there is a change to the value of the estate, you only have to write to HMRC if the change means that a full account (IHT400) would have been required if you had known all the information when you filled in the form...

To me that means I don't need to tell anyone anything with regard to the sale price of the house. So I won't.

SeniorSam

I hope you have stressed that the meeting is regarding a berivement and dealing with the settlement of the mortgage on completion of the sale, if not, then arother call may be appropriate. This may avoid a junior, inexperienced member of staff holding the meeting.

Whichever solicitor deals with the eventual sale, he will be duty bound to discharge the mortgage and will be acting for the mortgage lenders also. That is normal.

Sam

getmore4less

The important bit for IHT & CGT is has the property value been 'ascertained' by HMRC.
edit

it turn out it probably does not matter have a good rummage round the HMRC manual
http://www.hmrc.gov.uk/manuals/ihtmanual/IHTM33026.htm
http://www.hmrc.gov.uk/manuals/cgmanual/CG32234.htm

How long from DOD till the offers came in?


I would be surpised if they let any of you take over the mortgage without a set of checks since MMR.

Once you establish the potential gain you can have a plan.

whats the current probae value and the sale price?
What is the general trend in the ares for any houses not just those like yours.