CGT on inheritance

Cornish_Nige

Hi all - when my wife died in 2014, in accordance with her will I inherited a 50% share in a property that she had inherited from her father.

Her fathers will specified that his sister and her husband could live in the house rent free until both had passed away. It also specified that the ownership  of one half of the property would transfer to my wife when the elderly couple had both died. This arrangment was to be administered by a trust, the trustees being the sister and her husband.

The husband died about 20 years ago, she has just recently died. Not long after my wife died the remaining trustee nominated her son and another member of her family as trustees.

The deeds for the property have only ever had the names of the couple who were originally the trustees and then the the new trustees in the "title absolute" section. And as my wife had died before both of the elderly couple had passed away my wife had never owned her 50% share of the property, it was in trust for her when she died.

The old lady went into care in 2019 and the property was sold with the interest from the sale proceeds being used to help pay her care fees.

So now I am legally entitled to 50% of the proceeds of the sale of the house but I am confused as to whether there will be CGT on my part of the inheritance.

Can anyone in this forum advise ?

Thanks

Keep_pedalling

Sounds like a life interest trust. Because the beneficiaries of the trust was not a spouse I think CGT is applicable on any gain between the value of your share at the date of your wife’s death and the sale price ( less selling expenses)

I would establish exactly what type of trust it is and then consult an accountant.

Cornish_Nige

Keep_pedalling said:

Sounds like a life interest trust. Because the beneficiaries of the trust was not a spouse I think CGT is applicable on any gain between the value of your share at the date of your wife’s death and the sale price ( less selling expenses)

I would establish exactly what type of trust it is and then consult an accountant.

Gain in value would be about £28,000 so my 50% share of that would be £14,000

Keep_pedalling

Cornish_Nige said:

Keep_pedalling said:

Sounds like a life interest trust. Because the beneficiaries of the trust was not a spouse I think CGT is applicable on any gain between the value of your share at the date of your wife’s death and the sale price ( less selling expenses)

I would establish exactly what type of trust it is and then consult an accountant.

Gain in value would be about £28,000 so my 50% share of that would be £14,000

So very little tax with your £12,300 allowance, however it might be the the capital gains may need to be paid by the trust, only offering a £6,150 allowance against the gain across the entire life of the trust. I think the trustees need to take professional advice.

Cornish_Nige

Keep_pedalling said:

Cornish_Nige said:

Keep_pedalling said:

Sounds like a life interest trust. Because the beneficiaries of the trust was not a spouse I think CGT is applicable on any gain between the value of your share at the date of your wife’s death and the sale price ( less selling expenses)

I would establish exactly what type of trust it is and then consult an accountant.

Gain in value would be about £28,000 so my 50% share of that would be £14,000

So very little tax with your £12,300 allowance, however it might be the the capital gains may need to be paid by the trust, only offering a £6,150 allowance against the gain across the entire life of the trust. I think the trustees need to take professional advice.

I found this on a solicitors website:

Capital gains tax is payable on the profits earned by the trust.

Trustees have to pay capital gains tax on any amount over the annual exempt amount. The beneficiaries do not have to pay this type of tax on inheritance from a trust.

I also found that apparently "unspent" capital gains allowance from previous years could be used as well as the current year allowance.

getmore4less

The rules for life interest trusts can get complicated when a remainderman(your wife) dies.

Also typically the life tenant hold the beneficial interest within their estate.

Who owned the other 1/2 was that also within the trust?

The trust assets should not have been used for care fees of the life tenant.

Cornish_Nige

As an update a tax accountant has confirmed that private residence relief applies as the beneficiaries of the trust lived for 25 years in the property without having to pay a penny to the estate in rent.

According to this website - https://www.gov.uk/tax-relief-selling-home

You’re entitled to full Private Residence Relief - You don’t need to pay any tax on the gain you make when you sell your home.