Loss of FTB status due to inheriting the proceeds of an estate (not a named property)?

pjs493

My husband owned a property in his sole name since before we were married. I never lived there. Since before we were married it has been rented out and has always remained in his sole name. We have always lived in accommodation that was provided with his job and I can stay here until I find somewhere else to live. He died suddenly last year.

We looked into adding me to the mortgage while he was still alive so that I could get the rental income as my income for tax reasons (I had no income due to maternity leave and subsequently not working due to providing childcare whereas he was working full time) but at the time we were advised not to do this by both a solicitor and his accountant because I would lose my FTB status. The accountant and solicitor both stated my husband was better off paying the income tax due on the flat income so I could retain my FTB status and avoid SDLT if we bought a second property (either as another rental concern or as our own home). So we kept the flat in his sole name.

I'm the beneficiary of his Will and also the executor. I am selling the flat in Probate in my role of executor. The mortgage has been paid off with other funds from the estate and the mortgage lender has updated the Land Registry to show that they no longer have an interest in the property. In order to completely finalise his estate, the flat needs to be sold to release equity to pay the last couple of things. I was advised by both a solicitor and an accountant not to change the flat into my name as part of administering the estate because I would lose my FTB status and would be subject to SDLT when I buy my first property.

I'm now in the process of buying a house for myself and our children to live in. My solicitor is content that I am a FTB because I've never owned any property. However, the estate agent is insisting that I am not because I inherited my husband's rental property. I've tried to point out that I inherited the proceeds from his estate and the property was not listed in the Will as a named asset, but they are adamant that stamp duty will be due. Annoyingly we reached this impasse at 1700 on a Friday evening before a bank holiday weekend so I can't ring them to follow up on the email they sent me, nor can I contact my solicitor, HMRC, or an accountant until Tuesday.

To avoid me potentially freaking out over a £7000 stamp duty bill all weekend that the estate agent insists will be due, is anyone able to offer any clarity? If I was considered a FTB when my husband was still alive, why am I not now? Is my solicitor wrong? As mentioned above, the property wasn't named in his Will (whereas a charitable donation and some more sentimental bequests are listed and beneficiaries named, I inherit the residue of his estate after these gifts), my name is not on the Land Registry title, and I've never lived there. 

Am I now facing £7000 SDLT simply because my husband died and happened to own a property at that time? I inherited money from a relative some years ago and her house was sold in order to liquidate her assets and distribute money to several people who inherited from her estate. Neither my siblings nor I were considered to have lost our FTB status then, and indeed if it wasn't for knowing details of her assets we would never have necessarily known that the money we inherited came from the sale of a house. Do our infant children also lose their FTB status because they are also beneficiaries of my husband's estate (he left specific gifts to them that arguably could come from the proceeds of the house sale depending on how one decides to split hairs).

Hoenir

Is the flat being sold for a value in excess of the probate valuation? 

user1977

I think you've got mixed up between Capital Gains Tax and Stamp Duty Land Tax. The estate agent is talking nonsense anyway, if that was all you were wanting to check.

housebuyer143

What does it matter what the estate agent thinks? They don't process stamp duty or have any dealings with it. Listen to your solicitor.

EssexHebridean

Just stop engaging with the estate agent on this question. They’re stepping a long way outside of their lane and your financial affairs outside of the bare minimum they need from you (AML requirements) are none of their business. 

It makes me really cross when uppity agents act like this - but all the more so with someone in your position, and when they do it at a time which they fully expect to leave you feeling anxious for several days. 

pjs493

Hoenir said:

Is the flat being sold for a value in excess of the probate valuation? 

No, it’s actually being sold for a few grand less. 

pjs493

user1977 said:

I think you've got mixed up between Capital Gains Tax and Stamp Duty Land Tax. The estate agent is talking nonsense anyway, if that was all you were wanting to check.

There’s no CGT because the rental property hasn’t increased in value since Probate. Indeed it hasn’t really appreciated at all since it was purchased due to stagnation in the local property market. 

pjs493

housebuyer143 said:

What does it matter what the estate agent thinks? They don't process stamp duty or have any dealings with it. Listen to your solicitor.

They asked for proof of funds for the value of the property, plus SDLT. They know I’ve never owned property before and that the property I’m selling belonged solely to my late husband and that I’m selling it in my role as executor of his Will. 

I tried to clarify that I’ve never owned that property, or indeed any at all, in an email this afternoon in case it was all crossed wires. But the reply I received bang on 1700 was that I’d inherited the property so would therefore be liable for SDLT. 

So while it doesn’t matter what they think, they still want proof of funds to take the house off the market. I can obviously go back again with something from my solicitor stating it’s not due, but I just wanted to ask the question here so I wasn’t worrying about it all over a bank holiday weekend. 

I’m reassured by the answers here because I honestly thought for a second that somehow the previous advice I’d received had all been wrong. 

pjs493

EssexHebridean said:

Just stop engaging with the estate agent on this question. They’re stepping a long way outside of their lane and your financial affairs outside of the bare minimum they need from you (AML requirements) are none of their business. 

It makes me really cross when uppity agents act like this - but all the more so with someone in your position, and when they do it at a time which they fully expect to leave you feeling anxious for several days. 

They’re asking for full bank statements for proof of funds for the purchase price of the house (I’ll be a cash buyer once I received the proceeds from the sale of my husband’s rental property) plus proof of funds to cover SDLT as well as proof of source of funds for AML purposes. I really don’t mind giving them all that. I’ve already gathered print outs of the bank statements and sent them to my solicitor. Along with the letter from the MOD outlining the Death in Service payment as proof of source. 

But they’ve even asked for my husband’s death certificate because some of the funds are coming from the sale of his rental property and a Death in Service lump sum I received as his widow! Even the solicitor hasn’t asked for the death certificate. Which I don’t actually have because the inquest is yet to take place, so far all I have is an interim certificate. The solicitor was happy with the Will and Grant of Probate to demonstrate the proceeds of the sale would come to me as beneficiary. 

I get that the estate agency needs evidence that I can pay for what I’m buying, but the SDLT bit and the death certificate just feels intrusive coming from the estate agent. If it was the solicitor, I’d happily give them whatever they wanted. As it happens I have the funds for the SDLT too, but I just didn’t want to worry all weekend that I’d actually have to pay it. 

To be fair, they’re asking for more than my solicitor has at this point, but I’m aware my solicitor may require more stuff down the line. Especially as they’ll likely want several months worth of statements to show accrual of savings above and beyond the death in service payment and proceeds from the property sale. 

At the moment I’m in the fortunate position of being able to save about two thirds of my income so accrual of savings is easily demonstrated. 

Grumpy_chap

pjs493 said:

My husband owned a property in his sole name since before we were married. I never lived there. Since before we were married it has been rented out and has always remained in his sole name. We have always lived in accommodation that was provided with his job and I can stay here until I find somewhere else to live. He died suddenly last year.

We looked into adding me to the mortgage while he was still alive so that I could get the rental income as my income for tax reasons (I had no income due to maternity leave and subsequently not working due to providing childcare whereas he was working full time) but at the time we were advised not to do this by both a solicitor and his accountant because I would lose my FTB status. The accountant and solicitor both stated my husband was better off paying the income tax due on the flat income so I could retain my FTB status and avoid CGT if we bought a second property (either as another rental concern or as our own home). So we kept the flat in his sole name.

I'm the beneficiary of his Will and also the executor. I am selling the flat in Probate in my role of executor. The mortgage has been paid off with other funds from the estate and the mortgage lender has updated the Land Registry to show that they no longer have an interest in the property. In order to completely finalise his estate, the flat needs to be sold to release equity to pay the last couple of things. I was advised by both a solicitor and an accountant not to change the flat into my name as part of administering the estate because I would lose my FTB status and would be subject to CGT when I buy my first property.

I'm now in the process of buying a house for myself and our children to live in. My solicitor is content that I am a FTB because I've never owned any property. However, the estate agent is insisting that I am not because I inherited my husband's rental property. I've tried to point out that I inherited the proceeds from his estate and the property was not listed in the Will as a named asset, but they are adamant that stamp duty will be due. Annoyingly we reached this impasse at 1700 on a Friday evening before a bank holiday weekend so I can't ring them to follow up on the email they sent me, nor can I contact my solicitor, HMRC, or an accountant until Tuesday.

To avoid me potentially freaking out over a £7000 CGT bill all weekend that the estate agent insists will be due, is anyone able to offer any clarity? If I was considered a FTB when my husband was still alive, why am I not now? Is my solicitor wrong? As mentioned above, the property wasn't named in his Will (whereas a charitable donation and some more sentimental bequests are listed and beneficiaries named, I inherit the residue of his estate after these gifts), my name is not on the Land Registry title, and I've never lived there. 

Am I now facing £7000 CGT simply because my husband died and happened to own a property at that time? I inherited money from a relative some years ago and her house was sold in order to liquidate her assets and distribute money to several people who inherited from her estate. Neither my siblings nor I were considered to have lost our FTB status then, and indeed if it wasn't for knowing details of her assets we would never have necessarily known that the money we inherited came from the sale of a house. Do our infant children also lose their FTB status because they are also beneficiaries of my husband's estate (he left specific gifts to them that arguably could come from the proceeds of the house sale depending on how one decides to split hairs).

Sorry for your loss.

Listen to your Solicitor.
I understand they are correct, but what I understand is largely irrelevant - the Solicitor is the professional subject matter expert and carries PI cover which they won't put at risk over such a straight forward matter.
The EA is a nobody in this regard - simply deal with things through the Solicitor.  If the EA needs to be "shut down" on this, simply thank them for their comment and that you are confirming via your Solicitor.

housebuyer143

pjs493 said:

housebuyer143 said:

What does it matter what the estate agent thinks? They don't process stamp duty or have any dealings with it. Listen to your solicitor.

They asked for proof of funds for the value of the property, plus SDLT. They know I’ve never owned property before and that the property I’m selling belonged solely to my late husband and that I’m selling it in my role as executor of his Will. 

I tried to clarify that I’ve never owned that property, or indeed any at all, in an email this afternoon in case it was all crossed wires. But the reply I received bang on 1700 was that I’d inherited the property so would therefore be liable for SDLT. 

So while it doesn’t matter what they think, they still want proof of funds to take the house off the market. I can obviously go back again with something from my solicitor stating it’s not due, but I just wanted to ask the question here so I wasn’t worrying about it all over a bank holiday weekend. 

I’m reassured by the answers here because I honestly thought for a second that somehow the previous advice I’d received had all been wrong. 

Your EA is stepping way outside their level of understanding. You don't own the house just because you are the beneficiary - you are therefore as your solicitor confirmed, a FTB.
I wouldn't argue it with them, simply state in reply that you have been advised by your solicitor that you meet the criteria to be a FTB and therefore you will not be paying stamp duty, therefore no proof of funds are required for this.