Solvent but illiquid estate

TW1234

When a will leaves a bequest stated as a monetary amount (£K 325) to an adult child and the residue of the estate to the surviving spouse but the estate consists of £K 175 cash (equivalents) and £K 200 being 50% of the £K 400 marital home held as tenants in common, can the spouse "loan" £K 150 into the administration process and have the house transferred directly into her sole ownership?
The alternative would require the executors to transfer a part of the property to the child and leave the spouse to purchase it back; this seems more complicated.
Would stamp duty be applicable to either transfer?
Would the two residential exemptions be still available in full to the spouse's estate or how would the deceased's exemption be allocated?

Surviving spouse can easily accesss funds from own resources and all parties are amicable.

unforeseen

It sounds as though the will is written such that the executor must realise all the estates assets. How he/she achieved that in respect to of the 50% of the house I don't know.

I suppose there is the possibility to force a sale to enable the beneficiary to be paid if widow cannot raise the money to buy the deceased's 50% from the estate.

I don't think k the slide can loan the estate money and gives my the beneficiary the 50% of the house in the hope that the widow can buy it of him will not be in a cordance with the will.

Linton

-A will can be changed by Deed of Variation if everyone adversely affected by the change agrees.

-The spouse could buy the missing £150K part of the house from the estate so you only need a single transfer from the estate to the spouse of a half house. Its hardly a loan since the money has to go to the child, unless I have misunderstood something.

unforeseen

That wouldn't actually be a DOV though. Just a straight sale of the deceased's half of the house to the widow. The burning question would be whether the widow can actually come up with the money to buy it even at the reduced price to give enough cash in the estate to pay out as per will

Linton

unforeseen wrote: »

That wouldn't actually be a DOV though. Just a straight sale of the deceased's half of the house to the widow. The burning question would be whether the widow can actually come up with the money to buy it even at the reduced price to give enough cash in the estate to pay out as per will

I meant a DOV as an alternative if everyone agrees. For example the child's inaccessible cash could be replaced by a share in the house.

unforeseen

I suppose that would be ok pro using he moved in as well otherwise he could get bitten by CGT further down the line.

TW1234

There is no need for a DOV as there is no need to disadvantage either party. The surviving spouse has easy access to their own funds that could provide the £K 150 or the child is willing to defer matters indefinately, but my query is about the sequence of events that need to occur (effectively a sale) and between exactly which parties.. Would the sequence affect the stamp duty involved? Would it affect how much of the unutilized residential exemption was available to the survivor's estate when they die?

Yorkshireman99

TW1234 wrote: »

There is no need for a DOV as there is no need to disadvantage either party. The surviving spouse has easy access to their own funds that could provide the £K 150 or the child is willing to defer matters indefinately, but my query is about the sequence of events that need to occur (effectively a sale) and between exactly which parties.. Would the sequence affect the stamp duty involved? Would it affect how much of the unutilized residential exemption was available to the survivor's estate when they die?

You need to pay a professional to get accurate advice. There are a number of potential pitfalls if you try and DIY it without doing so. The cost is likely to be far less than the cost if you mess it up.

getmore4less

Has this actually happened or is it a speculative inquiry?

The £325k appears to be to use up the standard nil rate band but does have the downside it is not transferable to the spouse.

Without the full picture it is not clear what the objectives are?

The spouse estate is clearly over the single nil rate band.

There may be other options.

getmore4less

Would the two residential exemptions be still available in full to the spouse's estate or how would the deceased's exemption be allocated?

try starting here on that one.
https://www.gov.uk/guidance/inheritance-tax-residence-nil-rate-band

TW1234

Thanks for all of the input.
My conclusion is that the executor should;-

Calculate IHT on the estate as follows.
Total estate £K 375 (£K175 cash, £K 200 property 50%)
£K 100 residential allowance should be offset against £K 200 property. (100%of the residential allowance has then been used so cannot be transferred on for spouse ultimate use.)
Remaining £K 275 can utilize the £K 325 nil rate exemption, thus leaving 50/325 of nil rate to be transferred for spouse future use.
Therefore no IHT due.

Distribute the estate as follows;-
Transfer 150/400 of the property to the spouse in return for consideration of (cash) £K 150.
(2%)stamp duty on £K (150-125 exempt band) amounting to £500 within 30 days of transfer to be paid by spouse.
Pass £K 325 (£K175 + £K 150) to child.
Transfer 50/400 of the property to spouse to fulfill the will conditions for Nil consideration and with no stamp duty due.

I would appreciate confirmation of my thinking.
If correct, would the revenue permit just one actual transfer documention to be done (as there is a paper overlap)?
Is there any reason why the £K 150 could not be merely a promissory note, that would ultimately be from spouse to child and settled when convenient or at death of spouse?