Deed of Appropriation - transfer of ownership, cost and delay?

itm2

I am an Executor for my late mother's estate, which included her home. We have agreed a sale price for the house which is £39,000 higher than the (RICS) valuation provided for Probate purposes. My sister and I are joint beneficiaries. In order for us to minimise our CGT bill we have asked the solicitor about drawing up a Deed of Appropriation. Their response is:

"Our Probate Department are advising that the only way that matters can proceed on the basis of a Deed of Appropriation would be to have the ownership of the property

transferred into the joint names of you and your sister. They feel that this is an administrative matter which is likely to cause delays for the sale

and extra additional expense which they feel is unnecessary."

Does the Deed of Appropriation actually require that the property be re-registered with the Land Registry? Does anyone have any recent experience of how much additional delay and cost this involves?

itm2

...and a related follow-up question...if we don't use a Deed of Appropriation, and sell the house directly from the estate. Would the CGT always be calculated at 28% of the difference in value? (or is there any way that a lower rate would apply, as my late mother was a basic rate taxpayer)

Savvy_Sue

itm2 said:

...and a related follow-up question...if we don't use a Deed of Appropriation, and sell the house directly from the estate. Would the CGT always be calculated at 28% of the difference in value? (or is there any way that a lower rate would apply, as my late mother was a basic rate taxpayer)

I'm not going to unpick the whole question completely, but if you sell from the estate, there is only ever one CGT allowance (which you clearly know), and AFAIK there's nothing which would change what that is or what the rate of tax would be - your late mother's tax status wouldn't be relevant, because this is a capital gain which has arisen after her death. 

Generally, I'd say that if you have advice from a solicitor, it's unlikely anyone here can give better. There IS a cost in drawing up such a deed, it might delay the sale (to the extent of losing it?) - have you done the 'back of an envelope' sums to see how much CGT you think you might save by NOT selling from the estate? Is it really worth it? 

itm2

The estimated saving is not far short of £5,000 - so quite significant.

The part in the solicitor's letter which says: "...have the ownership of the property transferred into the joint names of you and your sister" puzzled me, as I thought that a Deed of Appropriation did not actually transfer ownership.
???

Savvy_Sue

But the only way you can use your two CGT allowances is to move the house from the estate into your joint personal ownership. What do you think the Deed would do, if not that?

Land_Registry

itm2 said:

The estimated saving is not far short of £5,000 - so quite significant.

The part in the solicitor's letter which says: "...have the ownership of the property transferred into the joint names of you and your sister" puzzled me, as I thought that a Deed of Appropriation did not actually transfer ownership.
???

Your Deed of Appropriation and a Transfer are two separate deeds. And for very different purposes 
If you as executors decide to transfer to you as beneficiaries then there are forms to complete, a fee to be paid and a registration gap to wait to close. 

https://customerhelp.landregistry.gov.uk/guide-page-external/?stepid=2a7a55c0-8e82-eb11-a812-000d3ad48f95&kbonly=true&setanswer=

It’s rare to see at our end as most probate sales are completed by executors to buyers. Rarely are the beneficiaries involved in the transfer. 

We don’t deal with Deeds of Appropriation so would not know whether they are a common tool used in the way described

shiraz99

Savvy_Sue said:

But the only way you can use your two CGT allowances is to move the house from the estate into your joint personal ownership. What do you think the Deed would do, if not that?

That's not what a Deed of Appropriation does. The way I understand it is that it's sort of a halfway house allowing the property to be sold on behalf of the beneficiaries rather than the estate without actually having legal title transferred.

itm2

TBH I'm a bit concerned that our solicitor might not have come across a Deed of Appropriation before, as the wording of their letter (in the OP) suggests that they think a transfer of ownership is required. Which is making me wonder whether it would be simple enough to draw one up without the help of a solicitor. There's a template/example here, for example, which could be used as the boilerplate:
https://library.croneri.co.uk/cch_uk/rossprecedents/60-010

Any views?

getmore4less

shiraz99 said:

Savvy_Sue said:

But the only way you can use your two CGT allowances is to move the house from the estate into your joint personal ownership. What do you think the Deed would do, if not that?

That's not what a Deed of Appropriation does. The way I understand it is that it's sort of a halfway house allowing the property to be sold on behalf of the beneficiaries rather than the estate without actually having legal title transferred.

A deed of appropriation transfers the beneficial interest from the estate to the beneficiaries.

The land registry deals with the legal owners.

tigermark119

Hi. I’ve just joined the forum as I’m in need of some advice on Deeds Of Appropriation- and read the very interesting threads above. My situation is similar: I’m an Executor to my Father’s Estate; house valued at £450,000 in July for Probate; on the market 10 days and we have a buyer, who has offered £501,500. So a definite CGT issue if the sale goes through. Myself and my two Brothers are the Beneficiaries. For the record, there is a very, very bad relationship with one of the Brothers ( as he was not chosen as an Executor). My initial question is: what are the legal drawbacks of a Deed Of Appropriation? 

Thank you. 

Savvy_Sue

It depends what you are trying to achieve. 

Does the will give a straight split between the three of you?

What change are you wanting to make, and why?