CGT on part owned inherited property

older_and_no_wiser

My first post in this forum, so please go easy on me. ;-)

I part own my elderly father's property as joint tenants 50% each). He lives in the property and I own and live in a separate property. His property was part owned 3 ways with me, my late mother and father but when she died a few years ago, her share transferred to myself and my father. This has been confirmed by our solicitor.

When my father passes away, I'm wondering what (if any) CGT liability there will be if I were to sell it. The property is worth approx £210,000. It was purchased for £140,000 in 2014.

I'm also wondering if there could be a tax saving if we changed the ownership now so that I own a larger share (tenants in common - or is this something different?). 

Thanks in advance for any advice.

Jeremy535897

His half will be uplifted to market value on his death, although his gain would have been covered by main residence relief anyway. Your half will be subject to capital gains tax, with a base cost of whatever you paid for your third, plus the market value of your mother's sixth at the date of her death that was transferred to you.

older_and_no_wiser

Jeremy535897 said:

His half will be uplifted to market value on his death, although his gain would have been covered by main residence relief anyway. Your half will be subject to capital gains tax, with a base cost of whatever you paid for your third, plus the market value of your mother's sixth at the date of her death that was transferred to you.

Thanks for that. It sounds like it would be beneficial for CGT reasons for me to own a larger percentage of the property....I think.

If we changed the ownership to tenants in common with my dad and I became an 80% or 90% owner, would that reduce the CGT liability when I inherit the property?

uknick

Why do you think it beneficial for CGT reasons to own more?  At the end of the day, if you have a gain on the various percentages of the house you own, you will pay CGT.

Is there an IHT aspect to your thinking you haven't mentioned?

older_and_no_wiser

uknick said:

Why do you think it beneficial for CGT reasons to own more?  At the end of the day, if you have a gain on the various percentages of the house you own, you will pay CGT.

Is there an IHT aspect to your thinking you haven't mentioned?

There won't be any IHT to pay as the size of the estate won't be valued high enough for that.

The only possible advantage other than CGT saving (which doesn't look like it will change regardless of percentage owned), would be care home fee related. My father doesn't have much in savings (less than £23k) and is on pension credit. If he were to need to go into a care home and the council cover the fees, then they could potentially reclaim those after death from the sale of his home. If I owned a larger percentage then that would limit what they could claim..... unless they see the ownership change as deprivation of assets! 

Newly_retired

Yes, it could well be seen as DoA, given his age, as you say he is elderly. 

Jeremy535897

Owning more of the property will increase the tax payable on a sale, not reduce it, although your acquisition of part of his share of the house would be at market value at the date of any gift to you. Deprivation of assets is a serious risk in these cases.

Albermarle

unless they see the ownership change as deprivation of assets! 

Which is very likely as it is so obvious.

Keep_pedalling

older_and_no_wiser said:

uknick said:

Why do you think it beneficial for CGT reasons to own more?  At the end of the day, if you have a gain on the various percentages of the house you own, you will pay CGT.

Is there an IHT aspect to your thinking you haven't mentioned?

There won't be any IHT to pay as the size of the estate won't be valued high enough for that.

The only possible advantage other than CGT saving (which doesn't look like it will change regardless of percentage owned), would be care home fee related. My father doesn't have much in savings (less than £23k) and is on pension credit. If he were to need to go into a care home and the council cover the fees, then they could potentially reclaim those after death from the sale of his home. If I owned a larger percentage then that would limit what they could claim..... unless they see the ownership change as deprivation of assets! 

If you own a larger percentage then your CGT liability is likely to increase over time. Yes it would be DOA and do you really want to risk him ending up in over my dead body grange just so you can get a larger slice of his wealth? 

older_and_no_wiser

 Yes it would be DOA and do you really want to risk him ending up in over my dead body grange just so you can get a larger slice of his wealth? 

Oh no! I hope this isn't coming across as me being avaricious. My dad actually lives virtually next door to me. I spend a lot of time looking after him and helping out although he lives independently. I've actually persuaded him not to go into a care home as he's far too independent and I think it could cause a decline being in an environment that isn't right for him.

I just feel that this is something families need to discuss (and we've discussed this together numerous times) and be aware of any potential tax breaks for when the time comes.

uknick

To the best of my knowledge families have been discussing the care home cost issue for over 30 years along with the media and various Governments.

The answer nearly always comes down to;

a) if you take action after one's parents becomes elderly you run the risk of local authorities taking the deprivation of assets route and/or,
b) people incur an unnecessary CGT liability as their parents never go into a care home and,
c) it opens a debate on various social media sites about the moral of trying to avoid paying care homes costs with one's own assets.