CGT or not CGT that is the question. Am I a beneficial owner of my mother's house?

mordanteur

Hi everyone,

My father put me on the deeds of his house 30 years ago as joint tenants with him and my mother. He added a restriction to make us tenants in common many years later. When he died my mother inherited his third. I have not lived in the house during any of this time. My question is when the time comes am i liable for CGT on the third i already own when the house is sold? The estate as a whole will be below the IHT threshold so the other 2/3 will not be taxable.

I think it was done at the time to preserve at least some of the house from care costs in later life but both my parents have had the good fortune never to need the services of elderly care. If the third I own is CGT liable it will appear to have been a bit of an own goal but we were not to know that at the time.

I am confused as to the status of this. Could I give it back to my mother having never benefited from it and when the time comes inherit it anyway? Could I establish in some way she is 100% the beneficial owner although I am still on the title? Thoughts or further questions would be much appreciated.

Keep_pedalling

Unfortunately yes you will be subject to CGT on your 1/3 share when the house is sold, you would l also need to pay CGT if you transferred it back to your mother.

It is also the case that your share never left your parents estate for IHT purposes as this would have been classed a a gift with reservation of benefit (unless they were also paying you market rent for your share). This is only an issue if your share of the house would take your mother’s estate into IHT teretory.

mordanteur

That is disappointing. Is there not some declaration of trust that could be made that states the beneficial ownership differs from the legal ownership as I have had no benefit or interest in the house and my mother has been the sole beneficiary?
It seems unfair that a huge liability is created when no actual benefit from the property was intended and the property would have passed to me by inheritance anyway.

silvercar

mordanteur said:

That is disappointing. Is there not some declaration of trust that could be made that states the beneficial ownership differs from the legal ownership as I have had no benefit or interest in the house and my mother has been the sole beneficiary?
It seems unfair that a huge liability is created when no actual benefit from the property was intended and the property would have passed to me by inheritance anyway.

That’s not unheard of. The question is whether hmrc would accept it.

msb1234

mordanteur said:

That is disappointing. Is there not some declaration of trust that could be made that states the beneficial ownership differs from the legal ownership as I have had no benefit or interest in the house and my mother has been the sole beneficiary?
It seems unfair that a huge liability is created when no actual benefit from the property was intended and the property would have passed to me by inheritance anyway.

Would you think it unfair if your mother does need to go into a care home but the house couldn’t be sold to pay for her care as you own 1/3, which from what you say is the reason your parents made this move in the first place? You will have the benefit of inheriting many thousands of £££’s without having to do a single thing!

Marcon

mordanteur said:

That is disappointing. Is there not some declaration of trust that could be made that states the beneficial ownership differs from the legal ownership as I have had no benefit or interest in the house and my mother has been the sole beneficiary?
It seems unfair that a huge liability is created when no actual benefit from the property was intended and the property would have passed to me by inheritance anyway.

Why not get some professional advice based on a complete understanding of all the facts/sight of all relevant documentation?

Keep_pedalling

mordanteur said:

That is disappointing. Is there not some declaration of trust that could be made that states the beneficial ownership differs from the legal ownership as I have had no benefit or interest in the house and my mother has been the sole beneficiary?
It seems unfair that a huge liability is created when no actual benefit from the property was intended and the property would have passed to me by inheritance anyway.

My understanding is that CG liability falls against the person who is entitled to the proceeds of a sale which in this case is the legal owner. 

I don’t think there is a watt of undoing what was done 30 years ago but if this involves a substantial amount of CGT it may be worth seeking professional advice.

LunaLater

It seems that you tried to game the system to cheat the state out of your father’s liability to cover some of his care costs.

This is the result of that.

mordanteur

I was hoping for advice LunaLater. Your gloating over the apparent unintended consequences of my father's decision of 30 years ago doesn't qualify. As I said, I think that was the reason he did it. I am not sure. It wasn't discussed and I was a teenager at the time. I know he did take professional advice because my copy of the documents has another handwriting on it directing where it was to be signed.

I don't think organising your affairs in an attempt to minimise your liabilities is cheating. Yes, it may turn out to be an own goal in this case but an entire industry of financial professionals would be redundant if it we didn't attempt to react to the evolving legislation on tax and social care policy and just dutifully took our medicine.  

mordanteur

msb1234 said:

mordanteur said:

That is disappointing. Is there not some declaration of trust that could be made that states the beneficial ownership differs from the legal ownership as I have had no benefit or interest in the house and my mother has been the sole beneficiary?
It seems unfair that a huge liability is created when no actual benefit from the property was intended and the property would have passed to me by inheritance anyway.

Would you think it unfair if your mother does need to go into a care home but the house couldn’t be sold to pay for her care as you own 1/3, which from what you say is the reason your parents made this move in the first place? You will have the benefit of inheriting many thousands of £££’s without having to do a single thing!

You seem fixated on the idea that I am getting away with something. My owning a third of the house is no impediment to a local authority deferred payment scheme quite rightly recovering self-funding costs from my mother's estate. Two thirds of the value could be spent on her care. This year new rules mean that an £86,000 lifetime cap is being put on anybody's contribution to their own care. Her two thirds of the house would cover this liability on its own so there would likely be more than a third of the value of the house left in her estate anyway even if I didn't already own it. I am not achieving anything by owning this 1/3 or 'cheating' the state of anything.

Keep_pedalling

LunaLater said:

It seems that you tried to game the system to cheat the state out of your father’s liability to cover some of his care costs.

This is the result of that.

The OP made it clear that it was his father who instigated this, and his father also left his wife his share in his will which does not suggest that avoiding care costs for his wife was on his mind when he made his will, quite the opposite, so I think you are way off the mark here.