settling up an estate

weelassy

Hello, despite my username I do live in England and therefore subject to English Law. Our mother passed away leaving a small cash sum and her house which she owned outright. There are four equal beneficiaries, that's myself, my two sisters and a step father. I am the executor. After a year or so of relatively minor quibbles I asked if I could buy mum's house and after proper RICS valuations we have all agreed on a price of £320,000. So in effect £80,000 each. Now then, this is where it gets a bit fiddly. I am not only a wee lassy but a poor wee lassy (compared to my siblings). My sisters want me to live in what has been the family home and step father lives in his own house anyway (strange but true). Therefore youngest sis - a business woman- has been extremely generous to me and is giving me her share. This means that I now have in theory 50% of the house value, i.e. 2 x £80k = £160,000.
So when I actually come to buy the house properly using solicitors how do I account for it? As the house buyer do I still have to stump up the full £320,000 (using a mortgage) or is it ok to just pay the remaining £160,000 which will be paid out to the two remaining beneficiaries? Yes, I am a little confused but hopefully someone out there will have the right advice. Thanks for your patience.

silvercar

You pay off the other beneficiaries.

If you need a mortgage then you have 25% ownership as your inheritance; 25% gifted from your sister, 50% mortgage needed to pay off the other two.

getmore4less

Simplest way is to buy the house off the estate.
Can make getting a mortgage a bit easier as lenders and brokers understand this way as a standard transaction.

Sis needs to check if her gift will potentially cause any tax issues for her.

Keep_pedalling

If your generous sister already has assets that approach or are already in IHT territory, then she would be wise to transfer her inheritance to you via a deed of variation to make sure it never enters her estate.

Yorkshireman99

weelassy wrote: »

Hello, despite my username I do live in England and therefore subject to English Law. Our mother passed away leaving a small cash sum and her house which she owned outright. There are four equal beneficiaries, that's myself, my two sisters and a step father. I am the executor. After a year or so of relatively minor quibbles I asked if I could buy mum's house and after proper RICS valuations we have all agreed on a price of £320,000. So in effect £80,000 each. Now then, this is where it gets a bit fiddly. I am not only a wee lassy but a poor wee lassy (compared to my siblings). My sisters want me to live in what has been the family home and step father lives in his own house anyway (strange but true). Therefore youngest sis - a business woman- has been extremely generous to me and is giving me her share. This means that I now have in theory 50% of the house value, i.e. 2 x £80k = £160,000.
So when I actually come to buy the house properly using solicitors how do I account for it? As the house buyer do I still have to stump up the full £320,000 (using a mortgage) or is it ok to just pay the remaining £160,000 which will be paid out to the two remaining beneficiaries? Yes, I am a little confused but hopefully someone out there will have the right advice. Thanks for your patience.

Your generous sister should do a DOV so that her share goes to you. You then buy the reset from the estate You need a solicitor to deal with the sale and he should be able to do the DOV as well. It may cost a little more but by far the simplest way of dealing with the whole process.

weelassy

Thank s for your replies. Silvercars seems the most straightforward ...if it is that straightforward then all I need to do is pay my other sister and step father their respective sums of £80,000 each ?! I have been advised to use a different solicitor to facilitate the actual sale of mums house to me (by my main solicitor) to avoid conflict of interest. I shall ask my younger sister about the Deed of Variation ... is that because she might incur a cap gains tax bill if she doesn't go down that route ?

Yorkshireman99

weelassy wrote: »

Thank s for your replies. Silvercars seems the most straightforward ...if it is that straightforward then all I need to do is pay my other sister and step father their respective sums of £80,000 each ?! I have been advised to use a different solicitor to facilitate the actual sale of mums house to me (by my main solicitor) to avoid conflict of interest. I shall ask my younger sister about the Deed of Variation ... is that because she might incur a cap gains tax bill if she doesn't go down that route ?

The DOV prevents it becoming part of her estate should she die within seven years.

Tuesday_Tenor

Yorkshireman99 wrote: »

The DOV prevents it becoming part of her estate should she die within seven years.

OP, just to clarify this.

Sis can do a Deed of Variation, which in effect alters the will so that the share of the house intended for her goes straight to you from the estate. It never becomes her asset.

Without the Deed of Variation, the quarter share DOES legally become your sister's asset (even if none of you are thinking in those terms) and she then gifts it to you. IF Sis dies within 7 years of making the gift, then HER estate will have to include the asset ( in a way that tapers down over the 7 years) for the purposes of assessing Inheritance Tax. If she is already wealthy, then the existence of this now-gifted-away asset in her estate MIGHT increase her estate's liability for inheritance tax. That's why the DoV is being suggested. The DoV is something Sis has to do, not the Executor (tho you might facilitate it through the solicitors you're using).

getmore4less

There would be no taper relief on an £80k gift.

weelassy

Thank you 'Tuesday' ,that's a very thorough answer which is much appreciated.
I will pass this information on to her. Is a deed of variation subject to any time limits or value of gift ?

Yorkshireman99

getmore4less wrote: »

There would be no taper relief on an £80k gift.

The amount of a gift is taxed for IHT at a progressively lower rate after three years. I am assuming the gift is more than the amounts annually allowed so it certainly tapers in the usual meaning of the word. That is why it is known as taper relief. Quite why an £80 gift would not be eligible escapes me.