Passed in laws house in BIL name.

Metallicace

Bit of a strange one this. Basically my in laws signed over their house to their eldest son ( my brother in law), around 10/15 years ago, just in case they had to go into care. 
They both passed away in past couple years, now the house has finally been sold. 
As it's in BIL name, there will be capital gains tax. We do trust him to split the sale between the 3 siblings, but how do we work out exactly what CGT we've to pay. He's a few houses, so worried about extremely high CGT, whereas we need our third towards our first house. 
It all seems a bit of a muddle. The house has been empty, so it's not classed as a buy to let surely!? 

p00hsticks

Broadly speaking he'll pay CGT on the (selling price - value at the point it was put into his name - selling costs). 
If the transfer of names involved any costs then he may be able to deduct those as well.

Whether the house was a BTL or empty is immaterial - it's the fact that (I assume) it wasn't his main residence for the entire time it was in his name that created the CGT liability. 

He has 60 days after exchange of contracts to pay any CGT due. 

It's a shame that your in-laws did this but as the proverb goes 'it's no use crying over spilt milk'. 

Also note that assuming that the parents remained living in the property until their deaths and your BIL didn't,  then unless they were paying your BIL a market rent then it would be seen as a 'gift with reservation of benefit' and so I think the value of the property should have been taken into account on their deaths for inheritance tax purposes. 

Linton

I dont understand why the BIL should sell it at all, nor why the siblings should get anything.  Doesn't BIL own the house? 

I doubt the wheeze to force the local council to pay the in-laws care costs would have worked anyway (deprivation of assets).

elsien

I would imagine there was an informal agreement that the house should be sold and split between the three children at the point the parents died.
BIL clearly has no legal obligation to sell but has chosen to do the right thing, 

bompey

It’s not my area but it would be useful if those that do know the pros and cons of gifting like this could share them. I have family members who talk about this but I think it’s flawed for a number of reasons, such as loss of control of the asset, CGT arising, and potentially not utilising the Inheritance Tax nil rate band.

Keep_pedalling

Afraid you in laws were incredibly foolish to do this. Not only will your BIL have CGT to pay (unless he was living there as well) there could be a major IHT issue. As they continued to live in it after giving it away it will have not fallen out of their estate for IHT purposes. Not bing home owners for the last 10 years plus also means the residential NRB is no longer available, so the total available exemptions will be £650k rather than £1M.

Your BIL has no obligation in sharing the proceeds with any of his siblings. 

p00hsticks

bompey said:

It’s not my area but it would be useful if those that do know the pros and cons of gifting like this could share them. I have family members who talk about this but I think it’s flawed for a number of reasons, such as loss of control of the asset, CGT arising, and potentially not utilising the Inheritance Tax nil rate band.

The topic comes up time and time again. 
The main cons usually mentioned are: 

* Gifting a property in this way does not remove it from a persons estate for inheritance tax purposes if the people making the gift continue to live in the property and do not pay the new owner a market rent (' a gift with the reservation of benefits' )

* If those making the gift later want to claim tested benefits, or local authority care, then DWP or the local authority will probably deem the gift to have been a deliberate deprivation of assets, and they will be treated as still owning the asset for the purposes of means testing. 

* If the recipient of the gift does not live in the property, then, as in this case, they are building up a potential Capital Gains tax liability when the property is eventually sold. They will also not be eligible for any first time buyer initiatives, and if they do not already own their own home. will have to pay additional Stamp Duty Land Tax (or the regional equivalent) if and when they come to buy one. 

* If the recipient of the gift falls into financial difficulty, goes bankrupt or undergoes a divorce, then the value of the property will be taken into consideration and they may be forced to sell it, leaving the donors of the gift homeless. 

I am genuinely unaware of any pros if the property is the donors main residence - as described above, it does not save IHT (and the majority of estates don't pay IHT anyhow) and would not be a way of getting any care you may need paid for by the state (and the majority of people still don't end their lives in care homes).

The only potential half-way sensible reason for gifting in this way, as far as I can see it, is if a parent owned multiple properties and gave one to children to live in to get them on the property ladder (and then they'd have to pay CGT) 

Olinda99

off the top of my head I can think of a couple of reasons why someone might want to do this 

firstly if they gave the property to the child and the child lived there as their main residence as well as the parents ie it is the child's main home and the parents are lodgers or simply just family. if it was done long enough ago then it could not be taken into account for care home fees assessment

secondly if say one of the parents had died and the second parent was very old or ill then giving the house to the child before death would simply save all the hassle of having to go to probate if there were not much else in the estate. if it is a short enough period then it is unlikely much cgt would be built up.

Keep_pedalling

Olinda99 said:

off the top of my head I can think of a couple of reasons why someone might want to do this 

firstly if they gave the property to the child and the child lived there as their main residence as well as the parents ie it is the child's main home and the parents are lodgers or simply just family. if it was done long enough ago then it could not be taken into account for care home fees assessment

secondly if say one of the parents had died and the second parent was very old or ill then giving the house to the child before death would simply save all the hassle of having to go to probate if there were not much else in the estate. if it is a short enough period then it is unlikely much cgt would be built up.

Neither of those reasons are sensible things to do

p00hsticks

Olinda99 said:

secondly if say one of the parents had died and the second parent was very old or ill then giving the house to the child before death would simply save all the hassle of having to go to probate if there were not much else in the estate. if it is a short enough period then it is unlikely much cgt would be built up.

But if it's a 'short enough period' (i.e within seven years) then there wouldn't be time for the gift to fall outside the estate and so probate may well still be required. And by giving away the property prior to death, the executor would no longer be able to make use of the residential nil rate band - so with CGT a potential double tax whammy.

Keep_pedalling

p00hsticks said:

Olinda99 said:

secondly if say one of the parents had died and the second parent was very old or ill then giving the house to the child before death would simply save all the hassle of having to go to probate if there were not much else in the estate. if it is a short enough period then it is unlikely much cgt would be built up.

But if it's a 'short enough period' (i.e within seven years) then there wouldn't be time for the gift to fall outside the estate and so probate may well still be required. And by giving away the property prior to death, the executor would no longer be able to make use of the residential nil rate band - so with CGT a potential double tax whammy.

Even after 7 years it would not fall out of the estate as it would be a gift with reservation. For some odd reason it does not lose the RNRB, although in this case, because the gift was made prior to the introduction of the RNRB, it is lost.