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

p00hsticks

itm2 said:

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)

Not if the property is being sold by the estate, which has a single CGT allowance.

If the property was first transferred into the names of the beneficiaries and then sold, you could use the CGT allowance of each of the beneficiaries. 

But if you say that you already have a sale underway, I imagine you may run the risk of severely delaying the sale or even losing it together if you tried to do that at this point (and potentially running up increased solicitors bills ?)

itm2

Keep_pedalling said:

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

We paid for a RICS surveyor to provide a Probate valuation

itm2

Keep_pedalling said:

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.

I found this article, which suggests that the income from an ISA continues to enjoy tax-free status until the completion of the administration of the ISA holder’s estate:

https://www.litrg.org.uk/tax-guides/bereavement/how-does-personal-representative-deal-income-and-capital-gains-arising-after#toc-do-all-estates-have-to-report-capital-gains-to-hmrc-

It says:
"When a person dies, their ISA will become a continuing account of the deceased investor or a continuing ISA. This means it will continue to enjoy tax advantages (that is, the income will be tax free), until the earliest of:

• the completion of the administration of the ISA holder’s estate
• the closure of the ISA, or
• three years after the ISA holder’s death."

???

poppystar

itm2 said:

Keep_pedalling said:

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.

I found this article, which suggests that the income from an ISA continues to enjoy tax-free status until the completion of the administration of the ISA holder’s estate:

https://www.litrg.org.uk/tax-guides/bereavement/how-does-personal-representative-deal-income-and-capital-gains-arising-after#toc-do-all-estates-have-to-report-capital-gains-to-hmrc-

It says:
"When a person dies, their ISA will become a continuing account of the deceased investor or a continuing ISA. This means it will continue to enjoy tax advantages (that is, the income will be tax free), until the earliest of:

• the completion of the administration of the ISA holder’s estate
• the closure of the ISA, or
• three years after the ISA holder’s death."

???

I never got to the bottom of this one. One provider quoted and followed this another said it did not apply. I asked in another part of the forum and was told it is whatever the provider’s T&Cs say that applies and I gave up! It sounded like it was what should happen as it’s on a gov.uk site not just the link you had here but that is not what the provider said and so the estate lost out on a fair amount of interest. 

ljayljay

p00hsticks said:

itm2 said:

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)

Not if the property is being sold by the estate, which has a single CGT allowance.

If the property was first transferred into the names of the beneficiaries and then sold, you could use the CGT allowance of each of the beneficiaries. 

But if you say that you already have a sale underway, I imagine you may run the risk of severely delaying the sale or even losing it together if you tried to do that at this point (and potentially running up increased solicitors bills ?)

In a similar situation & arranging for solicitor to draw up 'Deed of Appropriation' for myself & two other beneficiaries. Spoke to HMRC who stated this was acceptable in allowing beneficiaries to utilise their own CGT allowances rather than doing a land registration prior to sale. Solicitor fee around £250 & just needs to be in place before exchange of contracts on house sale. 

Keep_pedalling

ljayljay said:

p00hsticks said:

itm2 said:

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)

Not if the property is being sold by the estate, which has a single CGT allowance.

If the property was first transferred into the names of the beneficiaries and then sold, you could use the CGT allowance of each of the beneficiaries. 

But if you say that you already have a sale underway, I imagine you may run the risk of severely delaying the sale or even losing it together if you tried to do that at this point (and potentially running up increased solicitors bills ?)

In a similar situation & arranging for solicitor to draw up 'Deed of Appropriation' for myself & two other beneficiaries. Spoke to HMRC who stated this was acceptable in allowing beneficiaries to utilise their own CGT allowances rather than doing a land registration prior to sale. Solicitor fee around £250 & just needs to be in place before exchange of contracts on house sale. 

But don’t do this if this would lose any of the beneficiaries their first time buyer status.

itm2

ljayljay said:

In a similar situation & arranging for solicitor to draw up 'Deed of Appropriation' for myself & two other beneficiaries. Spoke to HMRC who stated this was acceptable in allowing beneficiaries to utilise their own CGT allowances rather than doing a land registration prior to sale. Solicitor fee around £250 & just needs to be in place before exchange of contracts on house sale. 

This could be relevant to me, as I've only just instructed the solicitor and they haven't progressed anything yet (they are waiting for me to send them the Grant of Probate).

Do I need to arrange the "Deed of Appropriation" before the conveyancing, and then arrange the sale from the beneficiaries to the buyer? (instead of from the estate to the buyer). If this doesn't cause any huge delays it would probably be worth it - I estimate that it would save us £3,444 if we can use both of our CGT allowances, instead of the single CGT allowance available to the estate (28% x £12,300).

itm2

Re. the Deed of Appropriation: I've just had the response below from my solicitor. They note that the sale would "still proceed in your sole name as Executor" (I am the only Executor named on the Grant of Probate, although my sister was also an Executor)..

Would this in any way affect our ability to use both of our CGT allowances against the increase in the property value? (c.£39k higher than the RICS Probate valuation).

"...the Deed will provide that you and your sister are beneficially entitled to the

funds, but the sale will still proceed in your sole name as Executor, and we will still need

to transfer the funds into ideally an executors account or failing which a personal account

in your sole name as we would for any executor. We are unable to divide the funds.”

For your sister to sign and receive her own share of the funds you and your sister

would have to complete a formal transfer of the ownership of the property into your joint

names and either register that at the Land Registry or expect your purchaser to do that

when they submit their own application following completion."

getmore4less

poppystar said:

itm2 said:

Keep_pedalling said:

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.

I found this article, which suggests that the income from an ISA continues to enjoy tax-free status until the completion of the administration of the ISA holder’s estate:

https://www.litrg.org.uk/tax-guides/bereavement/how-does-personal-representative-deal-income-and-capital-gains-arising-after#toc-do-all-estates-have-to-report-capital-gains-to-hmrc-

It says:
"When a person dies, their ISA will become a continuing account of the deceased investor or a continuing ISA. This means it will continue to enjoy tax advantages (that is, the income will be tax free), until the earliest of:

• the completion of the administration of the ISA holder’s estate
• the closure of the ISA, or
• three years after the ISA holder’s death."

???

I never got to the bottom of this one. One provider quoted and followed this another said it did not apply. I asked in another part of the forum and was told it is whatever the provider’s T&Cs say that applies and I gave up! It sounded like it was what should happen as it’s on a gov.uk site not just the link you had here but that is not what the provider said and so the estate lost out on a fair amount of interest. 

Some ISA providers close ISA accounts on death(unless transferred to spouse) triggering the second case they just convert to regular savings account with no tax breaks till cashed in..

ljayljay

Keep_pedalling said:

ljayljay said:

In a similar situation & arranging for solicitor to draw up 'Deed of Appropriation' for myself & two other beneficiaries. Spoke to HMRC who stated this was acceptable in allowing beneficiaries to utilise their own CGT allowances rather than doing a land registration prior to sale. Solicitor fee around £250 & just needs to be in place before exchange of contracts on house sale. 

But don’t do this if this would lose any of the beneficiaries their first time buyer status.

Yes will depend on status of those involved. Myself & siblings/ beneficiaries are not FTB. Also I guess if already using up own CGT allowance would be beneficial to have separate allowance for estate. Although not sure if that is allowed.