Uc and inherited house, own half other owner buying out.

TELLIT01

Yamor said:

As mentioned above, your share of the value of the house could be treated as being very low, particularly if your brother (who is a joint owner) is living there, as it can be very difficult to sell the property in those circumstances. In fact, there's case law which states that often in these circumstances the value could even be nil.

However, there is another potential get-out: if your brother is over pension age, or has 'limited capability for work' (for example, if he gets UC or ESA), then the value of the property is ignored completely for as long as he is living in it.

Therein lies the potential problem as the OP has stated that the brother is not currently living there, but plans to move in later.

Leah30

Yamor said:

As mentioned above, your share of the value of the house could be treated as being very low, particularly if your brother (who is a joint owner) is living there, as it can be very difficult to sell the property in those circumstances. In fact, there's case law which states that often in these circumstances the value could even be nil.

However, there is another potential get-out: if your brother is over pension age, or has 'limited capability for work' (for example, if he gets UC or ESA), then the value of the property is ignored completely for as long as he is living in it.

TELLIT01 said:

Yamor said:

As mentioned above, your share of the value of the house could be treated as being very low, particularly if your brother (who is a joint owner) is living there, as it can be very difficult to sell the property in those circumstances. In fact, there's case law which states that often in these circumstances the value could even be nil.

However, there is another potential get-out: if your brother it  is over pension age, or has 'limited capability for work' (for example, if he gets UC or ESA), then the value of the property is ignored completely for as long as he is living in it.

Therein lies the potential problem as the OP has stated that the brother is not currently living there, but plans to move in later.

It is currently still going through the solicitors at the moment. He will be living in the house before its finalised. 
My brother isn't in a financial position at the moment to buy me out in full. 

peteuk

Where is your brother currently living? What’s stopping him buying you out? What agreement do you have in place to say he will buy you out?

You cant sell the property until you have probate. Im not sure how this affects selling a percentage of a house to the other owner.  But basically whilst in Probate you don't own it.  However you can live in it. 

Leah30

peteuk said:

Where is your brother currently living? What’s stopping him buying you out? What agreement do you have in place to say he will buy you out?

You cant sell the property until you have probate. Im not sure how this affects selling a percentage of a house to the other owner.  But basically whilst in Probate you don't own it.  However you can live in it. 

He is in rented accommodation and the owner is selling so he is moving in to the house. He financially can't afford the full half at the moment. I wouldn't sell unless he paid me the full amount. 
We have been told it will be completed around the time he moves in.

Would this affect any universal credit claim, we haven't had managed migration but it will come soon. We wouldn't claim until the managed migration came. 

kaMelo

It's difficult to say, currently it has no affect on tax credits but on UC it possibly would.

If your brother already lived there at the time of inheritance then the property valu would almost certainly be disregarded. As no one lives there currently there is nothing to stop the assets being realised. To voluntarily change that to one where realising your assets would be difficult, I'm unsure how that would be viewed by UC.

Leaving that aside this has the potential to get messy, how long would you be prepared to wait, what if your situation changed and you needed to make use of your share of the home before he could buy you out, what if he is never in a position to buy your share. How would that affect your relationship with him

It is your call at the end of the day but there are lots of ways this can get messy.

peteuk

Leah30 said:

peteuk said:

Where is your brother currently living? What’s stopping him buying you out? What agreement do you have in place to say he will buy you out?

You cant sell the property until you have probate. Im not sure how this affects selling a percentage of a house to the other owner.  But basically whilst in Probate you don't own it.  However you can live in it. 

He is in rented accommodation and the owner is selling so he is moving in to the house. He financially can't afford the full half at the moment. I wouldn't sell unless he paid me the full amount. 
We have been told it will be completed around the time he moves in.

Would this affect any universal credit claim, we haven't had managed migration but it will come soon. We wouldn't claim until the managed migration came. 

The timetables for Probate are not accurate.  Still waiting for ours and it’s been 4-5 months. 

Does your brother claim UC? If he does and has a housing element then owning the house will stop this. 

Having Half a house may effect your UC as discussed, you’ll have savings/capital over £16K,  this will be disregarded for the first year if you migrate from TC however at the end of the year your Claim may finish. 

Hermann

Leah30 said:

peteuk said:

Where is your brother currently living? What’s stopping him buying you out? What agreement do you have in place to say he will buy you out?

You cant sell the property until you have probate. Im not sure how this affects selling a percentage of a house to the other owner.  But basically whilst in Probate you don't own it.  However you can live in it. 

He is in rented accommodation and the owner is selling so he is moving in to the house. He financially can't afford the full half at the moment. I wouldn't sell unless he paid me the full amount. 
We have been told it will be completed around the time he moves in.

Would this affect any universal credit claim, we haven't had managed migration but it will come soon. We wouldn't claim until the managed migration came. 

As long as the property is with the executors and the estate has not been distributed the half of the house is not yours.

Depending on who the executors are and how helpful they are there may be some legitimate lee way as to when your share of the house is actually transferred. Possibly it would help you to delay that as long as is reasonably possible.

It may then be that when you do take ownership you brother may already be in residence, which possibly means UC take a different view, or indeed by then your brother is in a position to buy you out, which would affect a UC claim but you would actually have the money available to you at that point.

I've certainly seen situations where a property is still, quite legitimately, with the executors three years plus after the death. If that sort of time scale is possible in your circumstances then that may be a solution as it gets you to the point of your brother buying you out.

You'd need to explore what is legitimate for an executor to do in terms of timing and also how UC treat these situations as I have no idea if they have views on timescales for assets held with executors. I can't see how they could take an asset in to consideration until the executor has transferred it but perhaps there is something around avoidance/deprivation if an unreasonably long time is taken, however what is a 'reasonable time'?

Would need some research and I don't know if anyone on these boards know the UC rules well enough to suggest what is accepted and what is not.

As an aside if the property is currently empty make sure it is appropriately insured as an empty property by the executors and that the conditions of the insurance are being met. They often require inspection visits at specified intervals and mains services such as water turned off in winter months.

You won't have to look far to find people fallen foul of this with freezing weather causing burst pipes that leak for weeks seriously damaging the property and the insurance not paying out.

sheramber

If there is delay in transferring the property the potential CGT arises  for the estate on the increase in value between probate value and value when disposed off,. 

Hermann

sheramber said:

If there is delay in transferring the property the potential CGT arises  for the estate on the increase in value between probate value and value when disposed off,. 

Obviously its always best for the OP to get individual professional advice on complex tax matters but for the sake of discussion I understood that CGT would not be payable if the property is transferred directly to the beneficiaries as the value is taken as that at the time of death not that at the date of the transfer.

This is different if the property is sold by the executors before distribution as they may have experienced a gain that could then attract CGT.

For the OP they would need to consider if any CGT liability could arise between them receiving the property at distribution and the brother buying the OPs share. Any difference between the value at death and the value the brother buys at could involve CGT. 

As the brother is unable to buy out the OP for approx. 3 years then the date the executors transfer the property should have no effect as whenever that is done it will be assigned the value at death so any CGT liability will always be based on the difference between value at death & value at the time brother buys out. There is always the possibility the house value could fall over the next three years. I'm not seeing what difference there would be between executors distributing at the earliest possible moment or the latest possible moment in CGT terms?

From the Help sheet at https://www.gov.uk/government/publications/death-personal-representatives-and-legatees-hs282-self-assessment-helpsheet/hs282-death-personal-representatives-and-legatees-2023



And an example...

 

stuhse

Letting your brother live in a house rent free and without buying it because he cant afford to is fraught with pit falls.  How long until he will buy you out ?  Whats going to change that means he can afford to buy you out ?    What if he dies part way through ?  What  if you die part way through ? What if in three years he says he needs another 3 years ?