Buying house from Father (inherited from grandparents)

evsieplum

My grandparents recently passed away and left the house to my Father who has applied for probate today. We understand that the process may take a few months before he will be in a position to sell.
My Dad had a Chartered Surveyor value the property at a market value of £195,000 for probate. My husband and I want to buy this property to live in, we don't currently own anything else (recently sold our properties) and we have our own saved deposit to buy somewhere. The property is in Wales so subject to slightly different stamp duty laws than England from April 18, the threshold for no stamp duty will be £180,000 but at £195k, it is a whopping 3.5% from April 18.

My Dad is willing to sell us the property at £179,999 so we do not have to pay stamp duty, but I understand that if he died / needed care in the next 7 years, my husband and I could be liable for costs.Would this be at the rate of IHT, so 40% of £15k as this is the amount he gifted to us? Is this the only consideration? There are some mentions of Capital Gains Tax in some online articles but I am not sure if this would apply. Any help gratefully received.

AnotherJoe

What costs are you thinking of ?

You also seem to be mixing up care and IHT which are entirely different.

CGT is irrelevant.

PasturesNew

Some relevant questions:

Is the total estate likely to have to pay Inheritance Tax? How much the house is officially valued at might make a difference if it's "well under" or "well over".

Is your father the only beneficiary of the will?

In short: Unless some 'fraud' is going on/found then if your dad is the sole recipient of the house/value/estate in the Will then he can sell it to you for whatever price he likes.

Being close to Stamp Duty price there is a chance it'd be "picked at random" for investigation/checking, but that could happen no matter how much the house was worth/sold for just because that's what they do - they randomly check a few.

When you buy it your dad would get the money. If there were any future care fees to pay then they'd be looking at that pile of money, not you and not the house. That pile of money is more than sufficient for anybody "looking at how much he's got" to not have to look around and dig around under the basis of "where's he hidden the rest then?". So you can forget that idea.

evsieplum

SorryThat's why I'm posting I guess, it's very confusing I have read that if My Dad needed a care home or passed away, we could be liable for (I assume) £15k of care home costs, or if he died in 7 years, I guess we may be liable to pay 40% of that £15k in IHT?

creditscoremeansnothing

If there are other beneficiaries in the will and your father is the executor he is obliged to get the best price for the assets and not sell at a discount to a family member (unless it comes out of his share).

However if he is the only beneficiary then i can't see there being a problem.

You do not need to worry about any tax as it is taken from the estate.

The way i see it, and i could be wrong, he is basically gifting you 15k (the discount) and this would become a potentially exempt transfer if anything happened to your father within the next 7 years and then there may be tax implications if his estate is over the threshold. Either way i don't think its worth stressing too much over a possible 15k gift.

evsieplum

The total estate is about £340k, but we are hoping to use my Nan's nil tax band allowance so IHT is not payable. They both died very close together so probate forms going in at the same time, she did not have many assets in her name other than half of the house. We are hoping the IHT threshold will be £650k). My dad is the only beneficiary.

Sounds like hopefully we would be ok! Thanks for the help

creditscoremeansnothing

I believe the hmrc take a dim view on estates and property values "just under the threshold" be careful, an executor can be held responsible for for taxes in future if anything is found to be incorrect.

creditscoremeansnothing

evsieplum wrote: »

SorryThat's why I'm posting I guess, it's very confusing I have read that if My Dad needed a care home or passed away, we could be liable for (I assume) £15k of care home costs, or if he died in 7 years, I guess we may be liable to pay 40% of that £15k in IHT?

Its only 40% if he dies within 3 years, between years 3 to 7 you get a discount on the tax but i can't remember off the top of my head what the rates are.

TrickyDicky101

Look into a Deed of Variation to alter the terms of the will and thus entirely avoid any potential future issue with Deprivation/IHT.

Tom99

Since its a house being left to a child won't you also get 2x the new residential allowance ot £100k making a total of £850k IHT free?

Cheeky_Monkey

Can I just ask where you got the figure of £180k from? Everything I've read about the new LTT in Wales from April this year says that the threshold for not paying it will be £150k.