sibling buying family home from estate - stamp duty question

ChocolateTeapot2024

Hi Everyone,

This is my first time posting, so I may not be posting on the right forum...

We are looking for advice on the best way for one sibling to buy our parents house.

We 3 siblings are executors of our parent's estate. Our father predeceased our mother by 4 years. We have filling in all the papers and are waiting for deed of probate.

Sibling 1 wishes to buy our parents' home. Siblings 2 & 3 are happy for this to happen. We are all in a postition financially where we could sell our own home added to our portion of the estate to buy the others out, but only one of us wishes to do so. It will be their sole residence.

The estate (including savings and ISAs etc) is worth below 1m but the main part, the house, is in a trust - the surviving trustees are siblings 2 and 3. The beneficiaries of the trust are the 3 siblings. We will have to pay IHT on the house. We had a RICS valuation of £550k, with a market value of £605k

If Sibling 1 buys the house from the estate, do they have to pay stamp duty on the whole amount or on their portion? (I think if the house is divided equally, sibling 1 is taxed on 2/3 of the price).

If siblings 2 and 3 take a greater share of the other assets, so sibling 1 has more of the share of the house, will this reduce the stamp duty for Sibling 1?

If, in addition, Siblings 2 and 3 sign over the deeds of the house to Sibling 1 pending the sale of their own house before new Stamp Duty rules in April 2024, is there CGT to pay? Sibling 1 will then pay the balance once they have sold their house. Sibling 1 is not in a position to put their house on the market immediately.

MAIN Q

Is there an fair and straightforward way to do this?!!

Bottom line is we want to get on with eachother in the future, with no resentment over one sibling gaining more than the others, or sibling 1 feeling resentment over having to pay more taxes.

We are probably going to have to get legal/tax advice about this, but it would really help to have an idea beforehand, as our parent's were given bad legal advice before regarding setting up the trust and had no idea of the pitfalls.

Thank you for your help

xChoccie2024

Bigphil1474

afaik, stamp duty is based on the value of the purchase, so one sibling would pay SDLT on the 2/3 of the property they purchase. If the sibling buys the property before selling their other house, they will have to pay extra SDLT and claim it back once they've sold their other house - quite a lot extra..

If the RICS survey valued it at £550k, that's the value you should use (IMO), the marketed value is fairly meaningless as it's only worth what someone is willing to pay. The RICS value is based on a professional opinion, so will be more accurate and likely save you some tax, as well as the sibling who buys the property. 

Not sure about any of the 'trust' issues. I'd get legal advice. Is there a reason the whole estate isn't counted together?

There is someone on here who has excellent SDLT knowledge so pretty sure they'll be along soon to help. 

ChocolateTeapot2024

Bigphil1474 said:

afaik, stamp duty is based on the value of the purchase, so one sibling would pay SDLT on the 2/3 of the property they purchase. If the sibling buys the property before selling their other house, they will have to pay extra SDLT and claim it back once they've sold their other house - quite a lot extra..

Thank you - I had read about a 3% SDLT that could be claimed back - didn't realise it was on top of the regular SDLT

If the RICS survey valued it at £550k, that's the value you should use (IMO), the marketed value is fairly meaningless as it's only worth what someone is willing to pay. 

The RICS survey states the value of £605K with a 10% discount to arrive at the probate value of £550K.

The RICS value is based on a professional opinion, so will be more accurate and likely save you some tax, as well as the sibling who buys the property. I presume if house is sold for more than probate value, we are liable for tax on the difference.

Not sure about any of the 'trust' issues. I'd get legal advice. Is there a reason the whole estate isn't counted together? oh thats a long and heartbreaking story - suffice to say that if anyone's parents are talking to financial advisors or lawyers about putting their home into a trust to save losing it to pay back healthcare costs, IMPLORE THEM NOT TO DO IT - our parents were badly advised and it will not protect people from healthcare fees eating into their savings/house

There is someone on here who has excellent SDLT knowledge so pretty sure they'll be along soon to help. 

Thank you for all of your advice - it really helpful

Albermarle

Not sure about any of the 'trust' issues. I'd get legal advice. Is there a reason the whole estate isn't counted together? oh thats a long and heartbreaking story - suffice to say that if anyone's parents are talking to financial advisors or lawyers about putting their home into a trust to save losing it to pay back healthcare costs, IMPLORE THEM NOT TO DO IT - our parents were badly advised and it will not protect people from healthcare fees eating into their savings/house

This issue comes up regularly in this and other MSE forums.
It is a kind of urban myth that trusts are an easy way to avoid care costs and IHT, compounded by some firms of lawyers pushing them.
Except in unusual circumstances or we are talking about properly rich people, then they are best avoided. they bring a lot of hassle and cost, often without even achieving the original objective.
There are some exceptions such as a Disabled persons trust, or a Life interest trust can be useful for some.

ChocolateTeapot2024

Thanks Albermarle - I totally agree. I think a lawyer and a financial advisor took advantage of my parents when they were most vulnerable. It would never have worked as they advised - to avoid healthcare costs. Thankfully both my parents got their wish - to live out their days in the family home.

jonnydeppiwish!

If the estate is worth £900k for example, RICs value £550k, cash £350k.

Each beneficiary gets £300k.

2 & 3 get £175k cash plus 125k interest in property.
1 gets £300k interest in house so will pay £250k for the property. 3% additional SDLT will be due but can be claimed back if residence sold within 3 years.

@SDLT_Geek should be able to confirm 

Definitely get legal advice!

SDLT_Geek

jonnydeppiwish! said:

If the estate is worth £900k for example, RICs value £550k, cash £350k.

Each beneficiary gets £300k.

2 & 3 get £175k cash plus 125k interest in property.
1 gets £300k interest in house so will pay £250k for the property. 3% additional SDLT will be due but can be claimed back if residence sold within 3 years.

@SDLT_Geek should be able to confirm 

Definitely get legal advice!

This sounds right, except that it is now 5% additional SDLT rather than 3% additional SDLT.

Yes, it would need to be the existing home (not the inherited property) which is sold within 3 years for the extra SDLT to be recoverable.

Also the present £250K threshold for SDLT is falling to £125K from 1 April 2025, so there would be an advantage to getting the transaction completed before then.