Transfer of Inherited Property to reduce CGT

Rosie1980

I understand that if an inherited property is transferred to the beneficiaries before sale they each have their personal CGT allowance and so a greater gain can be made before hitting a tax liability rather than if the executor sells the property.


However, what if there are more than 4 beneficiaries, does this mean the property cannot be transferred to the beneficiaries and would have to be sold by the executor?

getmore4less

The CGT allowance comes from the beneficial interest in the property not the legal interest(limited to 4 persons).

I think it is possible for the house to be sold without any transfer and the CGT allowances used, down to timing and where the estate administation has got to, this would need investigation clarification.

The administrators are trustees for those with the beneficial interest

Paulrm71

I sold an inherited property without transferring it to the beneficiaries (two people including myself), and was able to claim the personal allowance. Didn't seem any point in transferring the property when it was to go on the market immediately.

NordicNoir

Once HMRC consider that the "residual has been ascertained" the liability for CGT changes from the Executors to the beneficiaries. As getmore4less describes, this can be a subjective point in time and is open for challenge by HMRC.

One way to get around this is for the Executors to make a Deed of Appropriation. This will state that on a specific date that the beneficial interest in the house has passed to the beneficiaries and that they will then be acting as bare trustees on behalf on the beneficiaries. There is no need to change ownership at the Land Registry if selling on rather than keeping the house.

Rosie1980

Paulrm71 the gain on the property is well beyond the single allowance so tax will be due unless we can somehow get around it.

MichelleUK I have looked up a Deed of Appropriation and read that the personal representatives must use the value of the asset at the time of the appropriation rather than the value when the deceased died. This would still put the gain with the estate rather than individuals if the property has already substantially increased in value, or is this not the case?

Thank you all for your posts I've been trawling for hours but there is little on the web of any use.

NordicNoir

Rosie1980 wrote: »

MichelleUK I have looked up a Deed of Appropriation and read that the personal representatives must use the value of the asset at the time of the appropriation rather than the value when the deceased died. This would still put the gain with the estate rather than individuals if the property has already substantially increased in value, or is this not the case?

I can not really comment on what you have read without a link, but normally, provided the assent is made before the residual is ascertained, the value is that at date of death:

http://http://www.hmrc.gov.uk/manuals/cgmanual/CG31180.htm

xylophone

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/323671/hs282.pdf

may help.

CLAPTON

Rosie1980 wrote: »

I understand that if an inherited property is transferred to the beneficiaries before sale they each have their personal CGT allowance and so a greater gain can be made before hitting a tax liability rather than if the executor sells the property.


However, what if there are more than 4 beneficiaries, does this mean the property cannot be transferred to the beneficiaries and would have to be sold by the executor?

are you saying that the value of the property has risen significantly since the time of death ?

Paulrm71

I was in a similar situation where the value of the property had risen by 65k in 7 months. Use of the personal allowance made a big difference in theCGT due, and I have just received the billmfrom HMRC agreeing my calculation.

booksurr

Rosie1980 wrote: »

However, what if there are more than 4 beneficiaries, does this mean the property cannot be transferred to the beneficiaries and would have to be sold by the executor?

if, for example, the will stated that I leave my property at 123 Acacia Gardens in equal shares to uncle fred, aunt joan and their 6 children then the will makes them the beneficiaries from the outset, so the executors would simply be selling the property as bare trustees so each of the 8 beneficiaries would account for 1/8th of the gain less their own personal allowance in their respective CGT calculation

alternatively if the will stated that my property at 123 Acacia gardens is to be sold and the money shared amongst xy and z then the executors would be selling the property and only able to claim one CGT allowance as the ultimate beneficiaries are receiving the money from the sale not the benefit of the property pre sale so the beneficiaries have no CGT liability as it would rest with the executors

Rosie1980

CLAPTON wrote: »

are you saying that the value of the property has risen significantly since the time of death ?

Yes, she died at the beginning of the year and due to several sales falling through on her house it keeps being put back on the market. The current sale agreed is £30k more than the valuation at death and I'm not entirely convinced this one is going to go through.

Booksurr, the Will has lots of words in but it basically says that he Trustees (who I assume is the executor) shall sell anything that isn't money at the deceased's death and once all debts and expenses are paid this will be the residuary estate which will be shared out between ...

So from what you have said I assume this means that I can only use a single personal allowance and not the individual beneficiaries allowance and therefore need to look further into the assent information.

Thank you again everyone for your input. I'll be honest I never expected the house to rise in value and this to be an issue, the first sale was very quick and it's only been various issues and buyers pulling out which has meant it's been unsold for so long.