Savings worth more than Probate valuation when redeemed - subject to CGT?

itm2

When my mother passed away a few months ago I got written valuations from all of the institutions with which she had savings, and used these for the HMRC declaration for IHT. When the savings were redeemed, some of the accounts paid out more than was declared for IHT purposes (e.g. due to increase in share prices, interest, etc). Does this need to be declared as a capital gain by the beneficiaries? (if greater than the annual £12k CGT allowance)

shiraz99

It depends on how the executor is dealing with the shares. If they sell them and distribute the resulting funds then any CGT liability would lie with the estate. If the shares are transferred to the beneficiaries then they would be liable to CGT if or when they sell them on.

itm2

In this case they were all sold and are currently being distributed to the beneficiaries. So how do I make the necessary declaration to HMRC on behalf of the Estate, and settle the CGT liability?

shiraz99

Not too sure but maybe the following will help - https://www.gov.uk/report-and-pay-your-capital-gains-tax/if-you-have-other-capital-gains-to-report

Also https://www.gov.uk/probate-estate/reporting-the-estate

itm2

Thanks - I'll check out those links.

There is also the question of the house, which was left jointly to my sister and me (although we have no plans to transfer the property to our names). We have just received an offer which is £40k higher than the Probate valuation. Is the capital gain attributable to the estate, or to the beneficiaries?

shiraz99

itm2 said:

Thanks - I'll check out those links.

There is also the question of the house, which was left jointly to my sister and me (although we have no plans to transfer the property to our names). We have just received an offer which is £40k higher than the Probate valuation. Is the capital gain attributable to the estate, or to the beneficiaries?

The estate at this stage. It would only become your liability if the property was transferred to you and later sold.

This is also a good reason why you should always try and get an accurate valuation of the property. Some may thing to value it low for IHT purposes but then come unstuck because of the CGT liability. If anything it's better to over value for probate.

shiraz99

Who are the executors?

I'm not too sure, hopefully someone else can come along and clarify, but if both you and your sister are executors you may be able to use your individual CGT allowance.

itm2

My sister and I are the executors and beneficiaries (although only I was named on the Grant of Probate). Isn't CGT charged at a lower rate than IHT? (i.e. 20% rather than 40%)?

Keep_pedalling

shiraz99 said:

Who are the executors?

I'm not too sure, hopefully someone else can come along and clarify, but if both you and your sister are executors you may be able to use your individual CGT allowance.

No, you can’t use the executors allowances, you only have the single allowance from the estate.

Were all these assets disposed of within the same financial year?

itm2

Yes, the assets were disposed of in the same financial year. The main assets which appreciated in value since the death were two ISAs (one cash, one S&S), which were collectively worth around £8k more than the probate valuations.

Can the executors use their own CGT allowances for the increase in property value between Probate valuation and sale? (it is in the process of being sold, and should also complete within the same financial year)

Keep_pedalling

itm2 said:

Yes, the assets were disposed of in the same financial year. The main assets which appreciated in value since the death were two ISAs (one cash, one S&S), which were collectively worth around £8k more than the probate valuations.

Can the executors use their own CGT allowances for the increase in property value between Probate valuation and sale? (it is in the process of being sold, and should also complete within the same financial year)

Any increase in the value of the cash ISA will be from interest which is subject to income tax not CGT. On the S&S ISA CGT applies to any increase in the value of the shares or funds, but dividends are again subject to IT not CGT.

Any increase in property value only has the estate’s allowance. How did you value it?