Capital gains tax on property

poppystar

Keep_pedalling said:

Unfortunately it was a mistake putting half the house in their names. The sensible thing to do would have been to set up an immediate post death interest trust with the surviving spouse have the right to live there for life. This would have avoided any CGT liability for the sons as the thrust would have been the legal owner and the father the beneficial owner.
 

OP does say that mum’s Will gave dad the right to remain in the house - is this not sufficient for it to be classed as an IPDI? Changing the names to put half in sons’ names at that point wouldn’t have overidden this surely? [at least that is what happened in my case and it was treated as an IPDI despite the change in name for half the house after first death!! Oops?]

RAS

poppystar said:

Keep_pedalling said:

Unfortunately it was a mistake putting half the house in their names. The sensible thing to do would have been to set up an immediate post death interest trust with the surviving spouse have the right to live there for life. This would have avoided any CGT liability for the sons as the thrust would have been the legal owner and the father the beneficial owner.
 

OP does say that mum’s Will gave dad the right to remain in the house - is this not sufficient for it to be classed as an IPDI? Changing the names to put half in sons’ names at that point wouldn’t have overidden this surely? [at least that is what happened in my case and it was treated as an IPDI despite the change in name for half the house after first death!! Oops?]

The reason people here repeatedly advise beneficiaries not put property into their own names us because that renders them personally liable for CGT.

Sometimes that works in their favour. If there are multiple beneficiaries their joint CGT allowances are greater than the estate's sole allowance and can swallow up any short-term gain.

But if it takes years to sell the property, perhaps because it is occupied, then the beneficiaries CGT liability can be substantial. It's one of the major downsides of a situation where one sibling remains resident and the other has their own home. The resident gains bigger/better accommodation and the non-resident a large tax bill.

mybestattempt

poppystar said:

Keep_pedalling said:

Unfortunately it was a mistake putting half the house in their names. The sensible thing to do would have been to set up an immediate post death interest trust with the surviving spouse have the right to live there for life. This would have avoided any CGT liability for the sons as the thrust would have been the legal owner and the father the beneficial owner.
 

OP does say that mum’s Will gave dad the right to remain in the house - is this not sufficient for it to be classed as an IPDI? Changing the names to put half in sons’ names at that point wouldn’t have overidden this surely? [at least that is what happened in my case and it was treated as an IPDI despite the change in name for half the house after first death!! Oops?]

I may be wrong but my understanding is that it is necessary for the property to be held as tenants in common prior to the death the first spouse for the will to create lPDI trust.

If the parents were joint tenants then the property would pass wholly to the surviving spouse and fall outside the estate.

I think perhaps the father owned the whole property by survivorship and then gifted shares in the property to the OP and his brother after the death of their mother.

Holl774

Poseidon :- Well I thought this too but when it was mentioned in conversation with a colleague I went to the solicitors dealing with the house sale to mention CGT and what to do and was advised that 'we don't deal with CGT, you need to find a solicitor that does' which obviously didn't help in the slightest.

poppystar

mybestattempt said:

poppystar said:

Keep_pedalling said:

Unfortunately it was a mistake putting half the house in their names. The sensible thing to do would have been to set up an immediate post death interest trust with the surviving spouse have the right to live there for life. This would have avoided any CGT liability for the sons as the thrust would have been the legal owner and the father the beneficial owner.
 

OP does say that mum’s Will gave dad the right to remain in the house - is this not sufficient for it to be classed as an IPDI? Changing the names to put half in sons’ names at that point wouldn’t have overidden this surely? [at least that is what happened in my case and it was treated as an IPDI despite the change in name for half the house after first death!! Oops?]

I may be wrong but my understanding is that it is necessary for the property to be held as tenants in common prior to the death the first spouse for the will to create lPDI trust.

If the parents were joint tenants then the property would pass wholly to the surviving spouse and fall outside the estate.

I think perhaps the father owned the whole property by survivorship and then gifted shares in the property to the OP and his brother after the death of their mother.

Yes but OP says Mum and dad own a house since 1988, unfortunately mum passes away in 2013, so mums half of the deeds get put into both sons names with a solicitor. Which I read to suggest it was held as tenants in common.

poseidon1

Holl774 said:

Poseidon :- Well I thought this too but when it was mentioned in conversation with a colleague I went to the solicitors dealing with the house sale to mention CGT and what to do and was advised that 'we don't deal with CGT, you need to find a solicitor that does' which obviously didn't help in the slightest.

Sadly, despite solicitors having access to the kind of professional tax compliance support to assist them in assisting their clients in these situations, evidently many simply cannot be bothered to take on the continuous professional development this would entail. 

This then puts the unknowing client in the invidious position of having to check with the conveyancing firm whether they have general cgt compliance experience, prior to engaging them to handle a property sale.

At the very least, such firms should issue a well publicised disclaimer that they don't handle cgt before taking on a sale, so that a prospective client can at least make an informed decision whether to use them or not.  

If I did not feel confidence enough to move forward with this cgt compliance myself,  I personally would not waste time looking for another law firm to assist,  but find my nearest Chartered Accountancy firm ( registered with ICAEW), to give a quote.

Holl774

Thanks everyone for your comments. Can i take it as we would go with the date the deeds where amended to included both sons for CGT up to current date?  take off anything thats in the will that has to come out of the estate, and pay solicitors fees. Whatever is left this would be liable to CGT? Hopefully i have got this right?  ( iF whilst house was up for sale, the roof needed fixing and also the elecratics in the house, would i be able to take this off the estate costs too, as this was to ensure the property was safe, before selling?

silvercar

I’m going to move this to the tax board, where similar problems have been discussed.

Bookworm105

Holl774 said:

Mum and dad own a house since 1988, unfortunately mum passes away in 2013, so mums half of the deeds get put into both sons names with a solicitor. This then shows as dad owns 50% of his own house and sons own 25% each. House at this point is worth £300,000.00 10 years later April 2023 dad passes away and the sons the take over dad's half of the property as per the will, the deeds are amended to take dad off, So house is now 50 50 between sons and this is on the deeds... We put the house up for sale in june 2023 after dad passes away...We eventually sell the house for £140,000.00 and exchange contracts in October 2024. does this mean capital gains tax is required, and how much are we looking?

The will states so much needs to go to a relative in the will which we have to do by law, is this taken into account?

Your help is much appreciated.

in order to answer this please confirm what periods (if any) that either son has lived in the house as their respective only/main home whilst being an owner of it?
- from date of mother's death in 2013 each son owned 25% each of it 
- from date of father's death in April 2023 each son owned a further 25% each of it until sold in Oct 24

Holl774

None of the sons have lived in the property since before the mothers death. It was lived in from Mother passing away by the dad who owned 50% of the property and as you said the sons owned 25% each, then a further 25% each after dad passed away.