Inheriting unmortgageable property

Linton

lisyloo said:

Thanks for all the help so far

If an un-mortgageable property worth £50K at date of date, has it's value increased by trustees/executors to say £250K by making it mortgageable, then what is the probate value?

The probate value is the value at the time of death.  If the asset value increases significantly whilst in the hands of the executors the estate can be charged CGT.

lisyloo

Keep_pedalling said:

lisyloo said:

user1977 said:

I doubt the difference in value is going to be anything like that - if it were that easy to make a huge profit, you'd have a queue of eager cash buyers, which would make the "unmortgageable" value much higher, surely? Have you actually had anybody value it yet?

The numbers may be wrong. The idea of putting numbers on it is to expose the thinking (and the flaws within it).

Until we have a PRC we don't know whether there's nothing to do, or whether there's a 6 figure bill.
So I am factoring in for that uncertainty not just that they need cash.

Yes it's been valued by 2 estate agents at £250k-£260k for probate purposes, I think they would be assuming it's mortgageable.

I'll also put up a letter found but can't confirm it's the latest situation.

As that value is well under his NRB then there is no problem with using those numbers for probate. Where there is no risk of IHT over valuing a property for probate is quite a good move to avoid accidentally obtaining a CGT liability.

there is also cash (due to him getting his wife's savings).

I think there is potentially £1 million allowance if her allowance plus both residential allowances passes to him
So with the "life interest" part am I correct in saying the entire property is in his estate for IHT purposes but he gets her allowance plus the residential allowances? (£350K x 2 + £175K x 2 - minus bequests/gifts).

RAS

Basically yes providing she left everything to him. 

lisyloo

Keep_pedalling said:

What was the valuation given on his wife’s probate application and how long ago was this?

His wife died 6 months ago.
There was no probate obtained.
The bank did not require probate. They transferred joint accounts to him released her sole funds to him.
Does what she passed to him have to be deducted from her allowance available?

Keep_pedalling

RAS said:

Basically yes providing she left everything to him. 

But it does not sound like she did, in which case anything she left to her children reduces her transferable NRB. I don’t think her residential NRB can be used either because his beneficiaries are not her direct descendants. Seems odd that she left her savings to him rather than her children, it certainly was not good IHT planning.

With such a complex large estate you should be taking professional advice.

lisyloo

Keep_pedalling said:

RAS said:

Basically yes providing she left everything to him. 

But it does not sound like she did, in which case anything she left to her children reduces her transferable NRB. I don’t think her residential NRB can be used either because his beneficiaries are not her direct descendants. Seems odd that she left her savings to him rather than her children, it certainly was not good IHT planning.

With such a complex large estate you should be taking professional advice.

Apologies - I am somewhat confused.

She left her 50% (as tenant in common) to her daughter and Grandson with what looks like a will trust to ensure my Dad could continue living there during his lifetime.
Someone said (might have been you) that the entire property is part of his estate for IHT purposes because he had a beneficial interest.
She left her savings to him as he might have need them during his lifetime, so the need to live off the money trumps IHT planning.

It was all done via solicitors definitely deliberately. 
I wasn't personally overjoyed about it at the time as I'd rather they spent the money on care (if required) but she wasn't the sort to listen, however they did have professional advice on it. If it was done to protect 50% of the property from care fees then the solicitors should have given them advice on the IHT consequences. I have no reason to believe these aren't decent solicitors (see letter advising my dad of consequences of buying unmortgageable property).

It's not that large an estate. Around £330K with the complication of having no available assets (I think they did slip up a bit there but they've had bigger concerns like serious illness in recent years). 1 million refers to the potential max IHT allowance, although I'm not clear on which bits apply.

Yes it's getting more complicated than I first thought.

Keep_pedalling

lisyloo said:

Keep_pedalling said:

RAS said:

Basically yes providing she left everything to him. 

But it does not sound like she did, in which case anything she left to her children reduces her transferable NRB. I don’t think her residential NRB can be used either because his beneficiaries are not her direct descendants. Seems odd that she left her savings to him rather than her children, it certainly was not good IHT planning.

With such a complex large estate you should be taking professional advice.

Apologies - I am somewhat confused.

She left her 50% (as tenant in common) to her daughter and Grandson with what looks like a will trust to ensure my Dad could continue living there during his lifetime.
Someone said (might have been you) that the entire property is part of his estate for IHT purposes because he had a beneficial interest.
She left her savings to him as he might have need them during his lifetime, so the need to live off the money trumps IHT planning.

Apologies, I miss read your previous post and thought you were say his estate was approaching £1M, hence my tax planning statement. 

From the wording you quoted from the wills it is not at all clear that her will made him a life tenant which is why I think you need clarification from a professional. Just stating that the property cannot be sold without his permission does not creat a trust, I would expect much more explicit wording.

It was all done via solicitors definitely deliberately. 
I wasn't personally overjoyed about it at the time as I'd rather they spent the money on care (if required) but she wasn't the sort to listen, however they did have professional advice on it. If it was done to protect 50% of the property from care fees then the solicitors should have given them advice on the IHT consequences. I have no reason to believe these aren't decent solicitors (see letter advising my dad of consequences of buying unmortgageable property).

It's not that large an estate. Around £330K with the complication of having no available assets (I think they did slip up a bit there but they've had bigger concerns like serious illness in recent years). 1 million refers to the potential max IHT allowance, although I'm not clear on which bits apply.

Yes it's getting more complicated than I first thought.

Apologies once again for my misunderstanding.

lisyloo

Thanks all for your help.
No need to apologise is things aren't made clear.

lisyloo

user1977 said:

I doubt the difference in value is going to be anything like that - if it were that easy to make a huge profit, you'd have a queue of eager cash buyers, which would make the "unmortgageable" value much higher, surely? Have you actually had anybody value it yet?

UPDATE: Well this is interesting.

Estate agent 1 says: mortgageable value = £250K, probate value is the same without PRC as we know from local knowledge that the buildings in that street are sound and it's just a case of "getting a piece of paper".

Estate agent 2 says: mortgageable value = £250K, probate value because it is only available for cash buyers only is £150K.

I think estate agent 2 is wrong and not taking account of the fact that we are fairly sure it's just a case of paying a surveyor for the piece of paper so no-one in their right mind would sell it for £150K when the piece of paper if £1K but I have a vested interest.

Anyone want to comment on which is right?

Marcon

lisyloo said:

user1977 said:

I doubt the difference in value is going to be anything like that - if it were that easy to make a huge profit, you'd have a queue of eager cash buyers, which would make the "unmortgageable" value much higher, surely? Have you actually had anybody value it yet?

UPDATE: Well this is interesting.

Estate agent 1 says: mortgageable value = £250K, probate value is the same without PRC as we know from local knowledge that the buildings in that street are sound and it's just a case of "getting a piece of paper".

Estate agent 2 says: mortgageable value = £250K, probate value because it is only available for cash buyers only is £150K.

I think estate agent 2 is wrong and not taking account of the fact that we are fairly sure it's just a case of paying a surveyor for the piece of paper so no-one in their right mind would sell it for £150K when the piece of paper if £1K but I have a vested interest.

Anyone want to comment on which is right?

Do you think the time might have come for the executors to ask for help on this particular aspect of things from a properly qualified and informed solicitor? Opinions here are usually well meaning, but rarely have access to all relevant facts, let alone sight of relevant documents - and you definitely don't have any comeback if you act on 'advice' given on a public forum which turns out to be wrong.