CGT query on second spouse death

hjd

My colleague has this problem and I thought I would come here for advice.
He is one of 5 siblings, all living. His parents were married to each other until the first death.
In 2015 the parents made mirror wills and also severed their joint tenancy to become tenants in common. The wills stated that, for the first to die, everything went to the spouse other than their half share of the house, which went to their five children equally. After the second death everything would also be shared equally amongst the five siblings.
In 2021 the father died. Everything was transferred to the mother, obviously other than the half share of the house. Probate was obtained and the house was valued at £300,000. This valuation was a guesstimate from one of the sons as the solicitor handling probate rang him up and said (I am told) "We need a valuation for the house to put on the forms, it doesn't matter what figure really because the estate is not subject to inheritance tax."
In 2023 the mother died. Again they got a solicitor to obtain probate. The house was valued by an estate agent at £400,000 and has just been sold at that price. There was not much else in the estate and I do not think there was ant IHT to pay.
The solicitor doing the second probate has said they were badly advised in the past. However, what is done is done and they just want to get things done.
The question is - are the five siblings now liable for capital gains tax on the increase in value of the house since they inherited the first half? I have told my colleague that there is no CGT liability on the second death for their mother's share of the house, as it sold for the probate value. However, there is a gain of 50% of £100k (obviously will be adjusted for selling costs) on the increase in value of their father's share of the property. Will they be taxed on their share of approx. £10k each (less allowances)?
Had they been advised properly, they would have had the house valued on their father's death and, if it sold for £400k now it would have been worth more than £300k then.
The siblings all get on and will obviously pay any tax which is necessary.

Keep_pedalling

Did the father’s will give his wife the right to remain living in his share for the remainder of her life? If it did then legal ownership would transfer to an immediate post death interest trust and the beneficial ownership would be with the surviving spouse. This would mean the children would not actually inherit until their mother died and the whole house forms part of her estate for IHT purposes so CGT would not apply.

If no such clause existed (which would be unusual if this was drawn up by a solicitor) then each of the 5 children would have a CGT liability.

hjd

Thank you. I think there was this clause but can't check at the moment, will ask next week.

hjd

According to an email sent by the solicitor dealing with the father's estate

Under the terms of the WIll, your late father has left his 1/2 of the property to the children, but given your mother a 'right of occupation'. The right of occupation enables her to live at the property for the rest of her life. When the property is eventually sold, your father's 1/2 of the sale proceeds will be divided between the children.

 

You may recall that the purpose of doing this is so that, if your mother needs residential care in the future, your father's share of the property is protected from being used towards the payment of that care (because it has passed to you and your siblings).

Without seeing the actual wording this looks to be OK. Note that the solicitor dealing with the father's probate was from a different legal firm from the one who drew up the wills, and no concerns were raised at the time of first probate.