CGT Liability with inherited property 18 August 2022 at 10:53AM edited 18 August 2022 at 10:56AM in Deaths, funerals & probate 4 replies 164 views

shiraz99

Following on from this recent thread Savings worth more than Probate valuation when redeemed - subject to CGT? — MoneySavingExpert Forum I though it best to start my own as it has a different twist on the subject.

My parents had mirror wills made up, giving each other the right to occupy the property for the surviving spouse with their share being held in trust to be passed on to myself and my two siblings. The trustee (and executor) was named as the surviving spouse with substitute trustees and executors being myself and my siblings on the death of the surviving spouse. I've assumed this is what is referred to as a life interest trust.

My Mother died in 2018 and my Father earlier this year for which I (acting as executor) have now been granted Probate for his estate, the value of which was based on his share of the property. My question is this, how will the CGT liability be calculated on the property, will it be based on any gain from the full market value of the property on the death of my Father, or do I have to take into account the gain on the value of my Mother’s 50% share of the property since her death in 2018, and if so how is this even achieved and reported?

I've tried to have a read through the HMRC capital gains tax manual but it's quite difficult to decipher and in some places suggests that the value of the property as a whole is reset on the death of the surviving spouse in certain cases with no gains/losses up to this point.

Also, what is the best way to contact HMRC regarding this, I'd like to email them because of the detail but I only see options to phone or contact via post?

Keep_pedalling

A life interest trust for a spouse avoids any CG liability on any gain between the first and second deaths as the whole house forms part of the second estate for IHT purposes. In you case any gain on the value of the whole house from probate valuation to sale price will be subject to CGT.

shiraz99

Keep_pedalling said:

A life interest trust for a spouse avoids any CG liability on any gain between the first and second deaths as the whole house forms part of the second estate for IHT purposes. In you case any gain on the value of the whole house from probate valuation to sale price will be subject to CGT.

That's what I thought, the thing that has me a bit confused is the probate value recorded on the estate is based on my dad's 50% share of the property only.

Keep_pedalling

shiraz99 said:

Keep_pedalling said:

A life interest trust for a spouse avoids any CG liability on any gain between the first and second deaths as the whole house forms part of the second estate for IHT purposes. In you case any gain on the value of the whole house from probate valuation to sale price will be subject to CGT.

That's what I thought, the thing that has me a bit confused is the probate value recorded on the estate is based on my dad's 50% share of the property only.

The other 50% should have been declared as an asset held in trust (immediate post-death interest) on the IHT return. 

shiraz99

Keep_pedalling said:

shiraz99 said:

Keep_pedalling said:

A life interest trust for a spouse avoids any CG liability on any gain between the first and second deaths as the whole house forms part of the second estate for IHT purposes. In you case any gain on the value of the whole house from probate valuation to sale price will be subject to CGT.

That's what I thought, the thing that has me a bit confused is the probate value recorded on the estate is based on my dad's 50% share of the property only.

The other 50% should have been declared as an asset held in trust (immediate post-death interest) on the IHT return. 

What IHT form? It was declared as part of the IHT estate valuation and no IHT was payable.