Sale of Deceased's House by Beneficiaries or by the Executors?

RichardPM

Hoping somebody has been through this!
My mother passed recently and left her estate equally to her three offspring. The estate includes a residential property - registered at Land Registry ("LR"), no mortgage.
I am trying to understand what to do and in what order to ensure that the capital gain on selling the house (the difference between the potential sale price and the house valuation in the IHT400) is treated as a capital gain (a third each) for each of the 3 beneficiaries so that they are liable for the Capital Gains Tax ("CGT!), whatever that works out to be depending on their individual circumstances, rather than a capital gain on which the Estate has to pay CGT
My parents house was owned as tenants in common (with a "Restriction A").
My father passed leaving everything to my mother in his will.
Grant of Probate ("GoP") was obtained for my father.
LR were notified of my father's death but nothing further was done with LR
My mother passed away.
LR have not been notified of her death.
GoP has been granted for my mother's estate.
We (the beneficiaries of my mother's will and the two executors, also beneficiaries) now wish to sell the house.
I want to make sure that the capital gain on selling the house is treated as a capital gain by each of the beneficiaries - essentially a third each - with each beneficiary being liable for whatever CGT rather than the capital gain being treated as a gain by the estate and the estate having to pay the CGT.

Can this be achieved by
a) the executors selling the house and somehow the beneficiaries being alloicated the proceeds and the capital gain; or
b) does the house have to be transferred into the names of the beneficiaries first (presumably completing various LR forms & paying LR fees) and then the house sold by the three beneficiaries; or
c) something else!

Thanks in hope of any help!

Also I originally posted thgis in the wrong forum but coul;d not find a way to delete it or move it so if anyone knows how?

JGB1955

WHY do you want the beneficiaries to pay the CGT?  The property will have to be transferred into all 3 names, then sold, if you take your present choice.  (Option b).  The beneficiaries haven't been gifted one third of the house - they've been gifted one third of the estate (and if I was one of those beneficiaries I would be insisting on the estate selling the house, then distributing the proceeds).

Why is there a capital gain? You say your mother has passed away 'recently'... have house prices really increased that much since then?

RichardPM

Thanks for taking time to reply JGB1955.
I wish there was no IHT or CGT to pay!
Yes prices have increased. Value at death (as decided by 3 etate agents) was significantly less than an offer we have just received.
As I understand it (and I may not be using the right terms!):
a) if sold within estate and estate declares the capital gain then CGT payable @ 28% on any gain above £12Kish.
b) if sold by the three beneficiaries each of those declares the gain (one third each) and pays CGT dependent on their personal circs.
None of the beneficiaries are insisting on anything - we are all just trying to figure out the best way!

Keep_pedalling

RichardPM said:

Thanks for taking time to reply JGB1955.
I wish there was no IHT or CGT to pay!
Yes prices have increased. Value at death (as decided by 3 etate agents) was significantly less than an offer we have just received.
As I understand it (and I may not be using the right terms!):
a) if sold within estate and estate declares the capital gain then CGT payable @ 28% on any gain above £12Kish.
b) if sold by the three beneficiaries each of those declares the gain (one third each) and pays CGT dependent on their personal circs.
None of the beneficiaries are insisting on anything - we are all just trying to figure out the best way!

I think you are stuck with selling from the estate any transfer immediately before the sale would probable be dreamed as tax avoidance. If the estate had to pay IHT or was close to it you may find HMRC may challenge the original valuation it you may end up paying additional IHT rather than CGT. 

For large estates it is better to get a payed valuation from a RCS surveyor rather than estate agent guesstimates, as that is far less likely to be challenged by HMRC.

RichardPM

Thanks to all for the input / answers.

Grumpy_chap

RichardPM said:

Yes prices have increased. Value at death (as decided by 3 etate agents) was significantly less than an offer we have just received.

Assuming the timescale between the death and the sale of the property is short, then the value at sale is the value at death.  The original EA estimates were only estimates and the confirmed value can now be used for the determination of the estate value.

If that is correct. then there is no CGT, but the IHT liability may be higher.

Try to keep things as simple as possible.

Grumpy_chap

I am not a tax expert but, further to my note above, I think this is a matter of simple time-line and fact.  An event cannot be claimed to have happened in the past that did not happen.

RichardPM said:

Hoping somebody has been through this!
My mother passed recently and left her estate equally to her three offspring. The estate includes a residential property - registered at Land Registry ("LR"), no mortgage.
I am trying to understand what to do and in what order to ensure that the capital gain on selling the house (the difference between the potential sale price and the house valuation in the IHT400) is treated as a capital gain (a third each) for each of the 3 beneficiaries so that they are liable for the Capital Gains Tax ("CGT!), whatever that works out to be depending on their individual circumstances, rather than a capital gain on which the Estate has to pay CGT
My parents house was owned as tenants in common (with a "Restriction A").
My father passed leaving everything to my mother in his will.
Grant of Probate ("GoP") was obtained for my father.
LR were notified of my father's death but nothing further was done with LR
My mother passed away.
LR have not been notified of her death.
GoP has been granted for my mother's estate.
We (the beneficiaries of my mother's will and the two executors, also beneficiaries) now wish to sell the house.
I want to make sure that the capital gain on selling the house is treated as a capital gain by each of the beneficiaries - essentially a third each - with each beneficiary being liable for whatever CGT rather than the capital gain being treated as a gain by the estate and the estate having to pay the CGT.

Can this be achieved by
a) the executors selling the house and somehow the beneficiaries being alloicated the proceeds and the capital gain; or
b) does the house have to be transferred into the names of the beneficiaries first (presumably completing various LR forms & paying LR fees) and then the house sold by the three beneficiaries; or
c) something else!

Thanks in hope of any help!

Also I originally posted thgis in the wrong forum but coul;d not find a way to delete it or move it so if anyone knows how?

Distilling that into a timeline:

Date 1 = death.
The property is in the Estate

Shortly after date 1 - local EA estimates the value of the property at £xxx

Was the property transferred to the 3 beneficiaries at that time and at that value?  Stamp duty may have been payable by the beneficiaries acquiring the property.

Assuming this did not happen, we will reach Date 2.

Date 2 = property sold at £xxx + y%

IF Date 2 is long after Date 1 and the increase in value results in CGT liability, then that CGT liability falls to the Estate. 
No benefit in transferring the property to the 3 beneficiaries at this point, let the sale proceed and the value is assimilated into the Estate. Doing so would simply create two transactions on the property where one would suffice.  Both transactions may be subject to stamp duty.
Reported Estate value for IHT purposes to be adjusted.

IF Date 2 is short after Date 1, then the increase in value is not "real" but simply the original estimate was an error.  No CGT, but then the reported Estate value for IHT is to be corrected.

What is the timeline between the death and the property sale?

RichardPM

Thanks.
Property has not been sold.
I think I'll persevere with trying to find a lawyer / conveyancer to deal with this.
Thanks to all for the input.

RichardPM

Just to clarify: property has neither been transferred to anyone nor has it been sold.
Thanks.