One beneficiary buying out another's share of an inherited property - tax and other implications

naedanger

theoretica said:

Keep_pedalling said:

naedanger said:

Keep_pedalling said:

What is the approx value of the house and the value of  rest of the estate?

The house in the estate is around £200k. (Beneficiary 1's house maybe £100k - £120k.)
Rest of estate around £210k. (Beneficiaries are testator's children.)

So there is no need to for one beneficiary to buy the other one out. If the will simply splits the estate 50/50 then one gets the house plus £5000 from the rest of the estate and the other gets the remaining £205.

On reflection this seems simplest and to involve the least paperwork.  The one who got the cash can give their sibling a present afterwards without going through the estate at all.

I tend to agreee.
At the moment I am thinking:
- The potential future tax benefit the deed of variation would remove is not really a concern, and probably not worth the cost and effort, so I am going to put that to one side for the time being.
- It seems simplest that, once P1 has sold their property, each beneficiary takes 50% of the estate and then P2 gifts P1 the required amount. 
- A question I am not sure of the answer to is: if they take different assets but each to the value of 50% of the estate, then at what date is the asset split determined? If one asset has grown significantly, say the house, then the split is different depending on the date of calculation. (In this instance, as far as the beneficiaries are concerned, this is not an issue since they know a gift is being made that gives them a split they are happy with.) I suspect the answer is the split is based on the date of death valuation, which would be good, but I am far from sure. 
- It also seems two beneficiaries can reduce their cgt liabilities by varying the split of assets. Is the taxman quite content with this approach? (I suppose they are content with deeds of variations.) 
- I really don't think LBTT, Scottish equivalent of tax duty, is a concern but worth keeping in mind to double check.

getmore4less

What does the will actually say?
In most cases it will allow for the distribution to be by items and not 50% of each individual item to each beneficiary

Why not just  say "you want the house it's yours you start paying for it" (to preserve estate assets)  

if they don't want to move in yet may take advantage of class F exemption for council tax, but all the other bills should be theirs 

if it is a easy to value place then go with a valuation that both parties are happy with(and you as executor), from the data available covid means there is a gap in sold data but you should get close enough for this exercise

No IHT or CGT as it is going to be lived in make it relatively less important just keep the records in case the one taking on the house needs to justify the value at a later date for CGT

DOD is fine and the one moving in won't have any CGT issues unless they take ages to move in or move out later without selling.

House  satisfies part of their inheritance, the rest gets split to make it 50:50 and the gifts get sorted separately.

I think you are over thinking the valuations and split  as one will gifting part of their cash inheritance to the other they can decide at the time they gift for any changes in valuation they feel need adjusting, they have total control on how much they give away at the time. 

naedanger

The will basically says the whole estate is to go to the deceased's husband but as he predeceased her then equally to her two children.

I agree with the rest of what you say. (I wasn't worried about the date of the split from the point of view of the beneficiaries agreeing to the split, for the reason you give. I was concerned the taxman might have a rule on the date to use.)

getmore4less

Not sure the tax man will ever know unless the house needs a CGT calculation and that gets referred back to be "ascertained"

Don't think HMRC  care about distribution of assets other than they expect it to be about 1/2 each
(which they can refer back to if say you died soon after and your executor claimed you had nothing)

As there are enough assets for one to have the house and one to have other stuff that meets the will criteria.