Inherited Properties Issues

L362S10

Hello, all. I’ve joined MSE hoping someone can advise regarding issues around inherited property. Sorry in advance if this is long-winded and complicated

Over 20 years ago my partner and her brother inherited a deceased relative’s property in Scotland. The Will gave them joint executor status of the deceased’s estate but my partner allowed her brother to assume sole executor status. I thought at the time this was ill advised.

Initially it was assumed the property would be sold and the proceeds split. However, the brother preferred the option of renting the property out and using the income to enable him and my partner to finance their mortgages while keeping the property as a long-term investment. All well and good in theory.

My partner reluctantly agreed.

The property is rented out as a private rental managed by the brother. The rental income is collected into a bank account my partner has no access to. She has only ever received income from the property intermittently, always in cash and with no  documentation explaining e.g. the rental period the sum represents, and deductions for property maintenance etc etc. She’s not received anything for at least 6 years.

She has no record or evidence of the tax paid on the rental income.

The brother developed a reluctance to discuss the future of the property. He tends to vanish quickly when it’s mentioned. In fact, the property hasn’t been properly discussed for getting on 15 years.

The property remains in the name of the deceased aunt, so technically it’s still part of her estate.

Now it gets complicated.

In 2007 my partner’s mother died and she and her brother inherited a second though much smaller property also in Scotland. This property was already rented out through an estate agent (the mother’s residence was in England).

This time my partner took on the role of sole executor.

This property continues to be rented out via an estate agent. All income and maintenance costs are recorded and my partner includes the rental income on her annual tax return though in theory the property belongs to both.

However, this property, too, remains in the name of the deceased so technically it’s still part of the mother’s estate and I think (hopefully someone here can confirm) the tax should actually be paid on the deceased’s estate?

My partner wanted to transfer the property to joint ownership with her brother from the point she got probate but has been reluctant to do so while he passive aggressively avoids transferring the aunt’s property likewise.

The brother shows little interest in this second, less valuable property. I can’t up make up my mind whether he simply keeps putting things off because he has other things to do or he is quite deliberately and cynically holding the larger and more valuable property so he has the option to take up residence to be close to his beloved golfing and fishing  when he retires.

My partner has been reluctant to address the issue given the potential for conflict. However, we believe the situation is potentially storing up legal and financial complications which may come home to roost. Perhaps someone can advise me here if I am correct but I think the following may apply:

-          Potential liability for unpaid tax if the brother has not been declaring the rental income (we have no evidence either way)

-          Potential liability for including income earned from what is technically still a deceased person’s estate on a living person’s tax return (i.e. there is no tax allowance on a dead person’s income – all income is taxable)

-          Potential issues if either the brother or my partner needs to calculate th true value of their assets (e.g what if one of them falls ill and needs care?)

-          Potential issues related in particular to the brother failing in his role as the aunt’s executor.

 We are basically trying get to a position of having sufficient information so my partner can convince her brother it is best he agrees to the rental income on both properties being paid into a joint account with full transparency, that both properties be transferred into their names asap and there is reassurance the income is being correctly declared to HMRC.  

Any advice welcome.

 

buddy9

While both houses are located in Scotland, the deceased aunt's estate was subject to probate due to the aunt's domicile in England.

What was the domicile of the other deceased relative? Was the other house also subject to probate over 20 years ago?