Inherited house - buying out one sibling - most tax efficient way?

kernow1234

Our mother passed away, leaving a £390k house and £75k savings to myself and my two sisters. 

Me and one of my sisters want to keep the house, and we will have to buy the other sister out. Could I please get some advice on the most tax efficient, legal way to do this please? Primarily, if the stamp duty is calculated on the full value of the house or just the part that is being transferred? Ie. If we are entitled to the full £250k zero rate for buying her out, in which case there will be nothing to pay - or if the zero rate is applied to the full property value, in which case we would only get a proportion of that for the amount to be transferred? Likewise for the 3% (or 8%) additional rate because we each already own our own home. 

The house has not yet been transferred into our names at the Land Registry. 

Thank you very much in advance
Alex

GDB2222

You can rearrange the estate, so one sister gets all the savings, and her share of the house is reduced accordingly. That's assuming that the estate is still being administered. May need a deed of variation of the will, depending on what it says.

There are some SDLT experts around, so I won't attempt to answer that.

kernow1234

Thank you for the fast reply - what should I be looking for on the will? It specified fixed amounts for some people (already distributed) and the rest for us. (We have done probate ourselves.)

kernow1234

Actually sorry the other parts are not already distributed, but already taken into account for the above figures. 

p00hsticks

kernow1234 said:

Thank you for the fast reply - what should I be looking for on the will? It specified fixed amounts for some people (already distributed) and the rest for us. (We have done probate ourselves.)

Whether the house specifically is left to the three of you, or just the whole of the residual estate after the specific amounts. If the latter, and you are all happy with the £390k valuation, then rather than each sister getting ( 1/3rd of a £390k house + £25k in money) you could share it out so that you and one sister each get £155k's worth of house and the other sister get's £80k of house and £75k cash. That way only £80k has to change hands to get what you want, rather than £130k.

Not sure of the SDLT impications of either method....

Linton

kernow1234 said:

Thank you for the fast reply - what should I be looking for on the will? It specified fixed amounts for some people (already distributed) and the rest for us. (We have done probate ourselves.)

You can change the terms of the will in any way you wish as long as all affected beneficaries agree.  This is formally done by a "Deed of Variation" which sounds difficult but isnt - you can do it all yourself. However perhaps it is too late for this if the money has already been distributed.

AdrianC

The estate is £465k. I presume there's zero IHT because of spouse's previous death?

So each of the three is due £155k from the estate.

Two want to buy the third out.
All £75k cash goes to the third, leaving £80k to fund, £40k each.

SDLT_Geek

As above, by "appropriating" the inherited assets carefully, it might just be a share worth £80,000 to buy out. 

I would expect the 3% SDLT surcharge to apply to that, so the SDLT, on structuring it this way, would be 3% of £80,000, so £2,400.

kernow1234

My apologies for my slow reply. 

Thank you very much, all for the input and advice! 

Yes there is no specifics to the will so we can separate things more easily as you describe - thanks!
Regarding SDLT - so if for example £80k was to change hands, there would only be the additional 3% to pay? Would we get the full £125/250k zero rate? So this is calculated on the amount changing hands, not the value of the property and therefore a portion of that allowance? Eg. Zero rate £250k, or 64% of house value £390k, therefore 64% of the £80k is zero rate? I’m hoping you’ll say it’s not calculated like that!