Probate final stages - How to transfer house to ltd company efficiently and other questions

desjazz

I’m the Executor of my late mother’s estate and think I'm near the final stages of finishing things up. There is no IHT to pay on the estate. The headline figures are that the family home was valued at £240k at death and there are shares and savings at approx £150K in shares/savings and the estate is eligible for the residence nil-rate band. There are 6 siblings and things were mainly to be shared equally between us, apart from some specific items that were detailed in the will.

The last few things I need to sort out are as below:

1. Move the stocks/shares she owned to my name 

2. Pay all those listed in the will the specified amounts detailed in her wishes

3. Make an interim payment of the inheritance to my siblings, to provide them with some funds ahead of 4, below

4. Sell the family home and distribute the funds between myself and siblings (there are 6 of us)

I’ve got a few questions about these steps as below:

1. The shares/stocks

These are in a handful of companies she’d bought decades ago (British Gas, Shell, etc.). These were to be inherited by me and my siblings equally. My siblings are ok with them being sold and as I am happy to keep them, I plan to transfer them to my name, mainly to save the fees of selling them for now and I’ll just keep them in my own portfolio, ensuring that the value at the time I buy/transfer them is reflected in the amount I need to pay (5/6ths of the current quarter up value) to the estate to balance everything. Apart from making it clear that I purchased them and paying the necessary CGT based on any increase in value of the shares since the date of death, is there anything else I need to consider? I have already emailed the HMRC's Stamp Duty office to get an opinion about CGT to be paid by the estate for these which currently stands at 8.75% for dividends and 20% for any other income, so I assume it will be these rates applicable, so I'll need to ensure they are both calculated when all is complete. Am I right in saying that no IHT will be necessary for these and it will only be the CGT at the aforementioned rates?

2. Pay specific amounts to those listed in the will

Some of these are abroad and so it's likely to take slightly longer to arrange these payments. Does this step need to be fully completed before doing step 3 below?

3. Make an interim payment to sibings

I would like to make an interim payment soon to provide my siblings with some of their inheritance but as there is the possibility of that being delayed due to some of those specified people (in step 2 above) being located abroad, I want to check that it is ok to do so, even if I have not made all of the specified payments to specific people as detailed in the will first? I only ask as I seem to remember reading something about the order things need to be done before distributing the estate but as the only fees I need to pay will be tax on savings interest accrued since the death, CGT on share dividends and value increases and possibly some small CGT for an increase in value of the family home (i can't see this increasing more than £10k if anything at all), there should be more than enough savings funds to allow this to be done. I'm planning an interim payment of £10k each, leaving approx £60k savings held back once some funeral costs debts and the specific amounts in 2, above, are (re)paid, plenty to handle the remaining tasks

4. Sell the family house and distribute the funds

I plan to buy the house via a limited company (with a buy to let mortgage) for tax purposes; my current salary sits me in the 40% tax rate and having this as a personal purchase would not make it worthwhile. An initial quote from a local solicitors firm priced this at ~£2000 for their fees and ~£7k in stamp duty. I read here that there was apparently some way that this transfer to a company could potentially be done without stamp duty being levied but I’m assuming the solicitors know best here and are just handling this as a normal purchase, which might be right. I spoke to two solicitors from the firm:

- The first one I spoke to about using a deed of variation to complete this said that they should only be used when there is no money to be exchanged in lieu of the variation made.

- The second solicitor I spoke to wasn’t overly convincing/confident when I asked them about the best financially sensible way to do this transfer/purchase. They also stated that they could only act for one party (myself), so the others would need their own solicitor(s)... I understand why this part might be necessary to ensure the process is handled without conflict of interest/correctly with no room for complaints from siblings after the fact and although I don't foresee any issues, I'm keen to do things correctly to avoid any potential issues in future. I assume I (probably my siblings) could get another solicitor firm to act on their behalf, collectively, to save needing 5 other firms being involved which sounds like it would be ridiculous? Is there a better/other way to allow me to purchase the old family house and place it within a ltd company for the purposes of renting it out to avoid SDLT? 

This feels like a long post so thanks for reading. If there's any advice you can provide here, it would be helpful. If there's more info you need to answer, please do let me know.

Keep_pedalling

You should distribute the fixed sums before anything to the residual beneficiaries.

As for selling the house to your limited company, you would be better off posting any questions on that over on the housing board.

desjazz

Thanks for the reply, @Keep_pedalling. Looking at this co-op page it says to do legacy beneficiaries first. Am I missing something here?

Keep_pedalling

desjazz said:

Thanks for the reply, @Keep_pedalling. Looking at this co-op page it says to do legacy beneficiaries first. Am I missing something here?

It’s just a matter of terminology, legacy beneficiaries get fixed sums or fixed percentages and should be paid before the residual beneficiaries who get what is left (usually the bulk) of the estate. 

desjazz

Thanks. So in that case, it sounds like I need to complete the payments that I described as specific amounts (Legacy beneficiaries) first, before making any payments to the Residual beneficiaries (my siblings). Is that a hard and fast rule or, given that there will be more than enough funds available, can I still make a fixed amount payment to my siblings simultaneously?

Hoenir

There's nothing to stop you making interim distributions to the beneficiaries. In your capacity as executor just ensure you retain the neccessary funds to cover any eventuality before the estate is finally wound up. 

WindfallWendy

Re. The shares.... I had a nightmare trying to navigate what to do with some that were in my Dad's name. And I've since realised the implications of CGT.... but my plan is to sell them before I hit the value of them going up by £3k (which is when I think CGT becomes an issue). There weren't all that many so I'll just enjoy the occasional, modest dividend for a while yet.

Re. the transfer of the house... My husband considered buying his dad's house from his brother's when his Dad died, but to was too much hassle. I thought about holding on to a house when my Dad passed, but any rental income was entirely pointless and a lot less good that putting the value of the house into investments. Especially if you are already in the 40% tax bracket, unless you are in the property business already my (risk and hassle adverse) tendency would be to just sell it and deal with all the settling of the estate once everything is in liquid form.

I'm no expert though (but my financial advisor did agree that selling the hose rather than holding on to it was the sensible choice). Just my views.

Marcon

desjazz said:

4. Sell the family house and distribute the funds

I plan to buy the house via a limited company (with a buy to let mortgage) for tax purposes; my current salary sits me in the 40% tax rate and having this as a personal purchase would not make it worthwhile. An initial quote from a local solicitors firm priced this at ~£2000 for their fees and ~£7k in stamp duty. I read here that there was apparently some way that this transfer to a company could potentially be done without stamp duty being levied but I’m assuming the solicitors know best here and are just handling this as a normal purchase, which might be right. 

It's not a case of 'might be right', it is right! The link you've given refers to transferring a property at the time it is inherited by one individual. You've only inherited part of a house, so your limited company is going to be buying it rather than simply transferring it direct from the estate. Have a look at what Barratt has to say about buying houses using a limited company: https://www.barratthomes.co.uk/the-buying-process/buying-your-home-through-a-limited-company/

desjazz

Marcon said:

It's not a case of 'might be right', it is right! The link you've given refers to transferring a property at the time it is inherited by one individual.

Thanks,@Marcon. I wasn't sure what the circumstances were that would allow someone to move the house to a company without needing to pay the SDLT. I was likely very sleepy when reading that forum post where it had been done, so I must've missed the detail.

The info provided at the Barratt link is all info I'm aware of but I know that using the company for inheritance planning is also a potential benefit, which would be of some use.

Keep_pedalling

desjazz said:

Marcon said:

It's not a case of 'might be right', it is right! The link you've given refers to transferring a property at the time it is inherited by one individual.

Thanks,@Marcon. I wasn't sure what the circumstances were that would allow someone to move the house to a company without needing to pay the SDLT. I was likely very sleepy when reading that forum post where it had been done, so I must've missed the detail.

The info provided at the Barratt link is all info I'm aware of but I know that using the company for inheritance planning is also a potential benefit, which would be of some use.

It is only of use for IHT purposes if you beneficiaries want to take on the responsibility of being a landlord and very few do. If you sell or wind up a Ltd co on the death of the owner then you loose the relief.

Unless you are already an experienced landlord then I would think very carefully about doing this. Get some opinions over on the house buying, renting and selling board where the landlords and ex landlords hang out.

https://forums.moneysavingexpert.com/categories/house-buying-renting-selling

If you are still convinced that want to do this have a sit down with an accountant for professional advice on the best way to proceed. 

desjazz

Hi All,

I've come back for some more guidance on the stocks/shares query:

1. The shares/stocks

These are in a handful of companies she’d bought decades ago (British Gas, Shell, etc.). These were to be inherited by me and my siblings equally. My siblings are ok with them being sold and as I am happy to keep them, I plan to transfer them to my name, mainly to save the fees of selling them for now and I’ll just keep them in my own portfolio, ensuring that the value at the time I buy/transfer them is reflected in the amount I need to pay (5/6ths of the current quarter up value) to the estate to balance everything. Apart from making it clear that I purchased them and paying the necessary CGT based on any increase in value of the shares since the date of death, is there anything else I need to consider? I have already emailed the HMRC's Stamp Duty office to get an opinion about CGT to be paid by the estate for these which currently stands at 8.75% for dividends and 20% for any other income, so I assume it will be these rates applicable, so I'll need to ensure they are both calculated when all is complete. Am I right in saying that no IHT will be necessary for these and it will only be the CGT at the aforementioned rates?

I was planning to transfer the shares to an iWeb account to then sell them at reduced costs on behalf of the estate. I've done some looking into this and it works out as below for costs:

Selling directly with Equiniti: £315.33

Transferring to iWeb then selling: £75 (or £25 if transfer is free, although I believe they charge £10 per share transfer).

I tried and failed when transferring the shares to my iWeb account because they (Equniti) need the same name on the recipient account as is on the current holding, which is both the deceased and my name as the legal representative. I looked around and found that the transfer can't be done like that for estates/executors, which is a shame if that's right (if anyone knows different, please do let me know).

The option I've been given by Equiniti is to transfer the shares to my personal name and then move them to the new broker (iWeb). I don't mind doing this but I do want to be certain of how to do this so I'm compliant. Is my approach above sensible (i.e. the 5/6th payment to the estate) or would it be better for me to pay the current quarter up value for the fully holding to the estate personally to keep things simpler when it comes to distributing the eventual estate funds, so I'd just need to split it all 6 ways?

Looking at the government's website on this, once I have done the transfer, I need to:

1. Pay the tax on the dividends received since death (within 60 days of the transaction) from the estate funds
2. Pay tax on the increase in value of the shares since death (within 60 days of the transaction) from the estate funds
3. Keep a record of the value I acquired them at for CGT purposes on disposal (this bit is confusing as some of the holding (1/6) is inherited on the date of death, but the rest would be bought at whatever time I did this, so there would be 2 differing values to consider here. Am I over-complicating this?

The above sounds straight-forward enough although will need some forms filled in for each holding, so I can certainly see why people bite the bullet and just pay the extra to have the holdings sold without the extra effort as this would all be to save £280 which, in my late mother's mind would likely be worth the effort to save.

If anyone can help here or point me in the right direction, that'd be appreciated.