Using LISA before probate?

StatusRed

Hi,

I wonder if anyone knows the answer to a question like this...

If someone has a deposit saved up in a LISA and was about to buy a property within the next few months, BUT will be inheriting a share of a property through probate (when it's completed) can the LISA still be used and a property bought (with the Government bonus) before probate completes or will the probate process be flagged as part of the mortgage application and the mortgage company refuse it until probate is finished etc?

Thanks!

Tom99

If the person you are inheriting from has already died then it is likely the property is now owned by that person's estate. Do you envisage that your share of the property is to be transferred to you or is the property going to be sold by the estate and you will just receive your share in cash?

StatusRed

Hi Tom,

Thanks for your reply. The property won't be sold for some time, so a percentage will pass to me after probate. I guess what I'm trying to ascertain is.. do I technically already own part of the house now, or only after probate has finished?

If the latter, I should be able to use my LISA bonus before probate is done?

Thanks.

jonnygee2

probate process be flagged as part of the mortgage application and the mortgage company refuse it until probate is finished

Your mortgage company aren't responsible for your LISA bonus, it is usually applied for by your conveyancer after the sale is finalised.

Your conveyancer will be able to advise on your exact situation, but I believe it is possible that you are said to have an 'interest in land' and therefore not be eligible for the bonus. I would say, therefore, don't count on it unless you receive solid advice you are definitely eligible.

xylophone

https://www.taxation.co.uk/Articles/2017/03/07/336114/readers-forum-isa-problem

may be worth a look.

Tom99

StatusRed wrote: »

Hi Tom,

Thanks for your reply. The property won't be sold for some time, so a percentage will pass to me after probate. I guess what I'm trying to ascertain is.. do I technically already own part of the house now, or only after probate has finished?

If the latter, I should be able to use my LISA bonus before probate is done?

Thanks.

[FONT=Verdana, sans-serif]Download and read the .gov guidance note from here:[/FONT]

[FONT=Verdana, sans-serif]https://www.gov.uk/government/publications/stamp-duty-land-tax-relief-for-first-time-buyers-guidance-note[/FONT]

[FONT=Verdana, sans-serif]You are currently a FTB but you will cease to be a FTB on the day you own the beneficial interest in the property you are to inherit.[/FONT]

[FONT=Verdana, sans-serif]That will happen on one of two days, which ever comes first:[/FONT]

[FONT=Verdana, sans-serif]1 – The day the executors of the estate formally transfer your share of the property to you.[/FONT]

[FONT=Verdana, sans-serif]2 – The day the administration period of the estate ends because 'the residue of the estate has been ascertained' . There is no easy definition of exactly when that occurs, but only reference to past case law. Essentially it means the day the executors get to the stage where all assets and debt are known even if some of those assets have not yet been collected and even if some of those debts have not been paid. Its a very fuzzy definition and certainly open to interpretation with HMRC if ever it came down to it.[/FONT]

[FONT=Verdana, sans-serif]If I were you, I would try and prevent the executors transferring the property into your name until you have claimed, as a FTB, what you need to claim because you will also not get FTB stamp duty relief, so potentially could pay stamp duty on the 1st £300,000 which, currently, you will nor pay.[/FONT]

[FONT=Verdana, sans-serif]If you can do that then make sure you tell your solicitor the property is not yet in your name.[/FONT]

[FONT=Verdana, sans-serif]But I think the above will only apply if you are one of the residual beneficiaries. Eg the deceased left in their will 20% to x 50% to y and 30% to you. If the will specifically mentions the property and who it is to be passed to the maybe, I am not sure, the beneficial interest passed to you on the date of death, even though the legal interest is still owned by the estate.[/FONT]

[FONT=Verdana, sans-serif]Even if this is the case I would still try and delay the formal transfer to you and hope you can convince your solicitor you are still a FTB even though technically you may not be[/FONT]

StatusRed

Thanks for your great efforts Tom!

I am an executor of the will and am named as inheriting 50% of the property.

If the solicitor got funny about it, would it be possible to make a "deed of variance" and put all of the property in a relative's name who'd then gift it back to me after I'd used my LISA?

Thanks.

SDLT_Geek

Tom99 wrote: »

[FONT=Verdana, sans-serif]But I think the above will only apply if you are one of the residual beneficiaries. Eg the deceased left in their will 20% to x 50% to y and 30% to you. If the will specifically mentions the property and who it is to be passed to the maybe, I am not sure, the beneficial interest passed to you on the date of death, even though the legal interest is still owned by the estate.[/FONT]

My understanding is that even if there is a specific bequest of a property, the law of England and Wales does not mean that the beneficiary acquires an interest on death, HMRC appear to have it wrong in their guidance on the higher rates here: https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm09795 in their first bullet point. They have been told and will probably get around to correcting it eventually.

Even with a specific bequest the beneficiary does not have an interest in the property until there is an assent, appropriation or the administration is complete.

Tom99

StatusRed wrote: »

I am an executor of the will and am named as inheriting 50% of the property.
If the solicitor got funny about it, would it be possible to make a "deed of variance" and put all of the property in a relative's name who'd then gift it back to me after I'd used my LISA?
Thanks.

[FONT=Verdana, sans-serif]I feel sure that would be OTT and may well cause problems you might not have anticipated.[/FONT]
[FONT=Verdana, sans-serif]SDLT Geek has clarified the uncertainty over the specific gift.[/FONT]
[FONT=Verdana, sans-serif]So if you have not yet met either condition I set out above then you are not yet a beneficial owner and therefore still a FTB. Since you are an executor, even if there are other executors, you can obviously delay any formal assent to you to suit your needs.[/FONT]
[FONT=Verdana, sans-serif]The question about whether the administration period has come to an end is not well known so, even if it has, no one jumps up waving a red flag on that day and its really only you and your fellow executors who can really say for sure when that day occurs.[/FONT]
J[FONT=Verdana, sans-serif]ust make sure the estate still owns the property when you buy your house, then just tell the conveyancing solicitor that the house is still owned by the estate and you are therefore a FTB. Its highly unlikely they will want to question you about administrator periods ending. [/FONT]

StatusRed

After speaking to my uncle (a solicitor) today and the bank which holds my LISA my understanding is now as follows...

As the will states that there's a life interest (to allow my Mum to stay in the property rent free forever) I would be exempt under Scottish law to pay a 4% stamp duty tax on a "second property", which is good.

The bank has said, based on previous experience of this situation, that HMRC treat each situation on a case-by-case basis BUT in general if I can prove that I will not be living at the property (I don't, I live and work in Scotland, the property is over 300 miles away in England) then I should hopefully still be able to get the LISA bonus - but I need to confirm this with HMRC.

It's looking promising..