Probate and two homes

SonofSpeke

My mother passed away a few years ago and the probate has recently come through, everything was passed to my elderly father including two homes (both in mums name) and this just scraped in under the inheritance tax threshold. As I understand it my Mums tax allowance passes to my father, so he has both allowances now?

if he sells a house now while alive is he liable for Capital gains? if he passes in the coming years and we sell both homes what tax implications are there for me and my siblings? Both properties have development land potential is selling the gardens a better option? Thanks in advance for any help its my first loss and have nil experience..

naedanger

If your mother left everything to your father (assuming they were married, which I assume throughout this post) then the estate liable to inheritance tax should have been zero because of the spouse's exemption.

Yes your father's estate will have a nil rate band of £325k plus £325k transferred from your mother (since she left everything to him), and if he leaves a family home to his children then a further allowance of up to £350k can be claimed for that. (All assuming no change in IHT rules.)

All assets he has inherited are, for CGT purposes, regarded as having been acquired at their value on your late mother's date of death. (If either house is his main residence then no CGT would be due on the sale by him of that house.)

Again if/when you inherit from your father then the assets will, for CGT purposes, be assumed to have been acquired at their value on your father's date of death.

SonofSpeke

naedanger said:

If your mother left everything to your father (assuming they were married, which I assume throughout this post) then the estate liable to inheritance tax should have been zero because of the spouse's exemption.

Yes your father's estate will have a nil rate band of £325k plus £325k transferred from your mother (since she left everything to him), and if he leaves a family home to his children then a further allowance of up to £350k can be claimed for that. (All assuming no change in IHT rules.)

All assets he has inherited are, for CGT purposes, regarded as having been acquired at their value on your late mother's date of death. (If either house is his main residence then no CGT would be due on the sale by him of that house.)

Again if/when you inherit from your father then the assets will, for CGT purposes, be assumed to have been acquired at their value on your father's date of death.

Thank you for that, very helpful. Can I just clarify, so if the main residence has increased in value CGT would be due on the difference..?

naedanger

You don't pay CGT on your own main residence. So if your father sold his main residence he wouldn't pay CGT on any gain on it.

If you inherit someone else's main residence then its treated the same way as any other asset you inherit - you are liable for CGT on any increase in its value from when you inherited it (actually from the date of death of the person who left it to you) to the date you sell or dispose of it. Of course you still have your own annual CGT allowance so if any realised gains are less than that allowance you won't pay any CGT.

Keep_pedalling

CGT would only have to be paid if he sold the second property and it’s value has increased mor than his annual allowance ( currently £12,300) between the value at the date of her death and the sale price less selling costs.

As your father inherited everything from his wife his estate can claim both her nil rate band and her residence nil rate bade, so assuming his home is worth £350k then his estate would need to exceed £1M before any IHT would be payable,

As for what he should do with his properties and the land they stand on, no one on this board is going to be able to give advice, but if his estate is in excess of £1M or getting close to it taking professional advice from an IFA specialising in inheritance planning maybe worth while.

SonofSpeke

Appreciate the information thank you folks..