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

pjs493

Grumpy_chap said:

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.

This may be my approach next week. Although I can easily demonstrate the funds, if that’s enough for them to drop the subject. 

I suppose ultimately I’m more concerned about them demanding my husband’s death certificate for AML purposes because apparently the letter from the MOD of the death in service benefit I received following my husband’s death, and his Will and Grant of Probate naming me as executor isn’t sufficient for them to demonstrate proof of source of funds. 

I think that’s what’s got me riled up over it all, the debate over SDLT just seemed to start the annoyance. After all, a death certificate does nothing to proof that money laundering isn’t going on, but the Grant of Probate, Will, evidence of sale value of property, death in service letter, etc do help with that. 

After all the MOD isn’t in the habit of paying out death in service lump sums, and HMCTS aren’t in the habit of issuing a Grant of Probate if someone didn’t actually die. 

doodling

Hi,

It is clear that the estate agent is an idiot.  I would however refrain from pointing that out to them until after you have exchanged (though I might make  point of doing so after I got the keys).

I would point out that a court has concluded that your husband is dead, as evidenced by thegrantt of probate and whilst they can see the death certificate if they want, are they really more qualified than a court?

With respect to the FTB issue, I would suggest that the estate agent takes their own legal advice. You could try pointing out that if someone left a tiny fraction of their house to everyone in the UK then the estate agents argument would mean that no one in the country would be a first time buyer and that doesn't sound right.

thegreenone

I think I can see which planet the EA is on (not that I agree). 

There was a post on here not so long ago where a husband(?) posted that his wife was selling her property and they were buying together.  He wanted to avoid SDLT but the sale of her flat although only ever in her name made them, as a married couple, not FTBs.  I can't remember the exact details.

However, your circumstances are different, because you've never owned property in your name, your current marital status (my condolences) and the estate will be liquidised (sorry, not the best choice of words) and you will benefit only from cash.

I hope your Solicitor can give a full explanation on Tuesday.

gwynlas

The solicitor is qualified to complete conveyancing and deal with matters off tax for HMRC the EA is a layman with potentially no professional qualifications. You had professional advice re the flat previously and as you say benefit from the residue of the estate you never owned the flat. If necessary let the EA give their view to your solicitor and see whereit gets them. Enjoy the holiday weekend as best as you can.

bobster2

pjs493 said:

I suppose ultimately I’m more concerned about them demanding my husband’s death certificate for AML purposes because apparently the letter from the MOD of the death in service benefit I received following my husband’s death, and his Will and Grant of Probate naming me as executor isn’t sufficient for them to demonstrate proof of source of funds. 

As others have said - the estate agent is out of line - and getting into areas they have no expertise in. But surely of all the documents you could be asked to show - the death certificate is actually really straightforward? Dealing with an estate I must have shown the death certificate to dozens of organisations. Most were happy to accept an emailed scan.

user1977

bobster2 said:

pjs493 said:

I suppose ultimately I’m more concerned about them demanding my husband’s death certificate for AML purposes because apparently the letter from the MOD of the death in service benefit I received following my husband’s death, and his Will and Grant of Probate naming me as executor isn’t sufficient for them to demonstrate proof of source of funds. 

As others have said - the estate agent is out of line - and getting into areas they have no expertise in. But surely of all the documents you could be asked to show - the death certificate is actually really straightforward? Dealing with an estate I must have shown the death certificate to dozens of organisations. Most were happy to accept an emailed scan.

Plus it's a publicly-available document anyway, so not much point in arguing about whether they ought to see it.

propertyrental

If your husband's Estate sells the rental property (with you acting as Executer) then you will not have owned the property. Your husband owned, then his Estate owned, then the buyer owns it.

Clearly, there's no Capital Gains Tax - the property has not increased in value between Probate and sale.

What I'm slightly uncertain about, and you need an expert like your solicitor to confirm, is whether your previous status as spouse of someone with a property affects FTB status for SDLT purposes.

As for the EA wanting confirmation of funds, yes this is normal - his client (the seller) will want to be sure he's agreeing to sell to someone who can afford the agreed price. The simplest way to deal with this is via your solicitor. Your solicitor will in any case need to verify your source of funds (to make sure you are not money laundering from your people-smuggling business....), so get that done (fast) and then ask your solicitor to simply confirm to the EA that you are good for the purchase price of £X00,000 and related costs.

pjs493

bobster2 said:

pjs493 said:

I suppose ultimately I’m more concerned about them demanding my husband’s death certificate for AML purposes because apparently the letter from the MOD of the death in service benefit I received following my husband’s death, and his Will and Grant of Probate naming me as executor isn’t sufficient for them to demonstrate proof of source of funds. 

As others have said - the estate agent is out of line - and getting into areas they have no expertise in. But surely of all the documents you could be asked to show - the death certificate is actually really straightforward? Dealing with an estate I must have shown the death certificate to dozens of organisations. Most were happy to accept an emailed scan.

Because my husband died suddenly as a fit and healthy man at a relatively young age, the coroner opened an inquest. Therefore, what I have is an interim certificate or ‘fact of death’. The death certificate will only be issued after the inquest is concluded which may not be until next year due to back-logs. A technicality really as the interim certificate can be used to deal with Probate etc. But hopefully they will be happy with the Will and Grant of Probate. 

In my county it’s all digital so when banks etc have asked for an ‘original’ interim certificate, I’ve had to point out that it’s actually just a pdf document. There is a serial number on it and a phone number so obviously if an organisation wanted to verify it, they could. The Grant if Probate at least looks more official and tamper proof because it has a watermark and hologram seal. 

SDLT_Geek

propertyrental said:

If your husband's Estate sells the rental property (with you acting as Executer) then you will not have owned the property. Your husband owned, then his Estate owned, then the buyer owns it.

Clearly, there's no Capital Gains Tax - the property has not increased in value between Probate and sale.

What I'm slightly uncertain about, and you need an expert like your solicitor to confirm, is whether your previous status as spouse of someone with a property affects FTB status for SDLT purposes.

As for the EA wanting confirmation of funds, yes this is normal - his client (the seller) will want to be sure he's agreeing to sell to someone who can afford the agreed price. The simplest way to deal with this is via your solicitor. Your solicitor will in any case need to verify your source of funds (to make sure you are not money laundering from your people-smuggling business....), so get that done (fast) and then ask your solicitor to simply confirm to the EA that you are good for the purchase price of £X00,000 and related costs.

Good points are made here.

I confirm that the OP's having been the spouse of a person who wholly owned a property does not affect her status as a First Time Buyer for SDLT purposes.

pjs493

thegreenone said:

I think I can see which planet the EA is on (not that I agree). 

There was a post on here not so long ago where a husband(?) posted that his wife was selling her property and they were buying together.  He wanted to avoid SDLT but the sale of her flat although only ever in her name made them, as a married couple, not FTBs.  I can't remember the exact details.

However, your circumstances are different, because you've never owned property in your name, your current marital status (my condolences) and the estate will be liquidised (sorry, not the best choice of words) and you will benefit only from cash.

I hope your Solicitor can give a full explanation on Tuesday.

That was likely because they were selling a property owned by one and buying a new property together as a married couple. If one spouse (or civil partner) has previously owned, the other can’t claim FTB status with a joint purchase. 

When my husband and I considered buying a second property as a second rental, our plan was for me to buy it in my sole name because I was a FTB. This was advice we received at the time we were looking into it as the best way to go about it to avoid SDLT (which would be due if we bought the second property together).

Our future plan was to then over pay the mortgages using the rental income while we continued to move around with his job and lived in accommodation that came with it for a modest rent. The plan was that when he retired, we’d sell both properties (by this time both mortgage free), use his lump sum from his pension, put all of the funds together along with savings and hopefully buy a forever home mortgage free or with a small short mortgage. 

Obviously life didn’t work out that way, but I’ve found the perfect home to raise our children in so it’s the best I can make of things given that I’ve lost my husband and our children have lost their Daddy. While we were all looking forward to the adventures a military career brings, the best I can do now is get stability for the children and settle close to family so they can help when needed. Something that not always on hand when moving around with a job.