Sale of family home after parents death

Hoenir

ChocolateTeapot2024 said:

Keep_pedalling said:

I have to ask, why did you declare the value at £55k below the valuation?

We had the RICS valuation done for probate. The report states that the probate value is £550k and the market value is 10% above the probate value - thus £605k.

Is this unusual?

Never done this before, but we thought it was better to get a RICS valuation for whether sibling was buying or whether we put it on the market.

RICS valuation is better normally from a tax perspective. As CGT will be lower than IHT.  The District Valuer won't normally argue with a RICS valuation. Whereas may potentially dispute an unsubstantiated probate valuation where the eventual selling price is far higher. 

poseidon1

ChocolateTeapot2024 said:

Hello everyone
my sibling would like to keep the family home and wishes to buy her 2 siblings’ share. The property was valued at £550k for probate with an actual value of £605k (RICS valuation).
Sibling will have to sell their own house to buy it.
all three siblings could buy out the others by selling their own house but only one wishes to do so.
what is the best way to do this?
Does anyone have any experience of doing this?
many thanks for your help

Your original post mentioned the property was in trust on death of parents.

 You offered no details related to the trust, such as when it was established and what were the precise terms, sadly no one so far as thought to ask and appear to have glossed over its significance. However you did volunteer that the trust property attracted an IHT liabilty of £125,000 so I am guessing this is to met from liquid assets owned by your mother on her death where you are beneficiaries in equal shares.

As for the trust was it established during  your parents'  joint lifetimes if so was a pre March 2006 settlement?   As to its  general terms  did it  provide  for both parents to occupy  for life , with the property reverting to you and your siblings on 2nd death in equal shares?  Alternatively did the trust only arise on your father' s death and solely attach to his half share with your mother retaining a half share in her name?

The point of these questions is if the trust terms were largely  as stated above, the property  ( or part of the property ) was not legally part of your mother's estate on her death, although the tax calculation amalgamates the property  ( or share of ) with her 'free estate' for  IHT purposes .

  If the entire property was in trust,  the property ownership vested absolutely in favour of you and siblings distinct and separate from any liquid  assets in your mother's estate on her death.  You are therefore  dealing with two separate legal entities here. The estate and the now terminated trust. 

Clarification of the  trust questions would be appreciated.

As a  consequence, and contrary to what has been stated so far, this would not be a matter of a purchase of the property from a deceased estate, it would be a relatively straightforward sale by 2 absolute joint owners to  the third.  As such the SDLT and CGT rules for disposals between joint owners will apply. If however only part of the property was subject to trust ( ie your mother had retained her half share) then there is potential for SDLT mitigation by the purchasing sibling, by way of offsetting entitlement to liquid assets of the estate, assuming administration thereof remains ongoing.

As to the value of the property that should be utilised by the siblings for the purchase by the third member, you indicate a RICS valuation of £605k discounted by 10% to reflect joint ownership. Was this to reflect joint absolute ownership by the 3 siblings on the termination of the trust on mother's death, or was this as a result  of property being part owned by the trust and part owned by your mother at date of death? Details of the trust requested above should clarify this question.

Be that as it may, RICs valuations often verge on the cautious side so you should obtain a few local estate agent valuations to determine if the RICs valuation is realistic for the purposes of the negotiated sale to the third sibling. Bearing in mind the IHT valuation was agreed at the discounted £550k  figure , an average of say 3 estate agent valuations may help determine a more appropriate sale figure between you.

Finally, and in passing there may be a technical question as to whether ( in this specific circumstance) you are bound by the agreed IHT value of £550k  as the start point for the CGT calculation. There has been some debate on a specialist trust forum on this point - per link below

https://trustsdiscussionforum.co.uk/t/co-ownership-discount/23249

ChocolateTeapot2024

poseidon1 said:

ChocolateTeapot2024 said:

Hello everyone
my sibling would like to keep the family home and wishes to buy her 2 siblings’ share. The property was valued at £550k for probate with an actual value of £605k (RICS valuation).
Sibling will have to sell their own house to buy it.
all three siblings could buy out the others by selling their own house but only one wishes to do so.
what is the best way to do this?
Does anyone have any experience of doing this?
many thanks for your help

Your original post mentioned the property was in trust on death of parents.

 You offered no details related to the trust, such as when it was established and what were the precise terms, sadly no one so far as thought to ask and appear to have glossed over its significance. However you did volunteer that the trust property attracted an IHT liabilty of £125,000 so I am guessing this is to met from liquid assets owned by your mother on her death where you are beneficiaries in equal shares.

yes - an ISA was set up to cover taxes should they not survive the 7 years. Unfortunately dad died suddenly after 4 years. Mum survived him by 3 years.

As for the trust was it established during  your parents'  joint lifetimes if so was a pre March 2006 settlement?   As to its  general terms  did it  provide  for both parents to occupy  for life , with the property reverting to you and your siblings on 2nd death in equal shares?  Alternatively did the trust only arise on your father' s death and solely attach to his half share with your mother retaining a half share in her name?

The trust was set up in 2013. It provided for both parents to occupy for life. The trust is a bit of a monster - it owns the title of the house, so my parents names were no longer on the deeds. The trust failed (Dad died after 4 years), but as our parents names were no longer on the deeds we are liable for tax. Our parents were trustees, and 2 of the three siblings were trustees (the only reason for this was only 4 trustees were necessary). Our parents had mirror wills leaving everything to eachother.

The point of these questions is if the trust terms were largely  as stated above, the property  ( or part of the property ) was not legally part of your mother's estate on her death, although the tax calculation amalgamates the property  ( or share of ) with her 'free estate' for  IHT purposes .

  If the entire property was in trust,  the property ownership vested absolutely in favour of you and siblings distinct and separate from any liquid  assets in your mother's estate on her death.  You are therefore  dealing with two separate legal entities here. The estate and the now terminated trust. 

Clarification of the  trust questions would be appreciated.

As a  consequence, and contrary to what has been stated so far, this would not be a matter of a purchase of the property from a deceased estate, it would be a relatively straightforward sale by 2 absolute joint owners to  the third.  As such the SDLT and CGT rules for disposals between joint owners will apply. If however only part of the property was subject to trust ( ie your mother had retained her half share) then there is potential for SDLT mitigation by the purchasing sibling, by way of offsetting entitlement to liquid assets of the estate, assuming administration thereof remains ongoing.
this is what we are hoping to do

As to the value of the property that should be utilised by the siblings for the purchase by the third member, you indicate a RICS valuation of £605k discounted by 10% to reflect joint ownership. Was this to reflect joint absolute ownership by the 3 siblings on the termination of the trust on mother's death, or was this as a result  of property being part owned by the trust and part owned by your mother at date of death? Details of the trust requested above should clarify this question.

Be that as it may, RICs valuations often verge on the cautious side so you should obtain a few local estate agent valuations to determine if the RICs valuation is realistic for the purposes of the negotiated sale to the third sibling. Bearing in mind the IHT valuation was agreed at the discounted £550k  figure , an average of say 3 estate agent valuations may help determine a more appropriate sale figure between you.

ok this seems fair

Finally, and in passing there may be a technical question as to whether ( in this specific circumstance) you are bound by the agreed IHT value of £550k  as the start point for the CGT calculation. There has been some debate on a specialist trust forum on this point - per link below

https://trustsdiscussionforum.co.uk/t/co-ownership-discount/23249

Thank you - this has all been very enlightening

I'll try to answer your

poseidon1

ChocolateTeapot2024 said:

poseidon1 said:

ChocolateTeapot2024 said:

Hello everyone
my sibling would like to keep the family home and wishes to buy her 2 siblings’ share. The property was valued at £550k for probate with an actual value of £605k (RICS valuation).
Sibling will have to sell their own house to buy it.
all three siblings could buy out the others by selling their own house but only one wishes to do so.
what is the best way to do this?
Does anyone have any experience of doing this?
many thanks for your help

Your original post mentioned the property was in trust on death of parents.

 You offered no details related to the trust, such as when it was established and what were the precise terms, sadly no one so far as thought to ask and appear to have glossed over its significance. However you did volunteer that the trust property attracted an IHT liabilty of £125,000 so I am guessing this is to met from liquid assets owned by your mother on her death where you are beneficiaries in equal shares.

yes - an ISA was set up to cover taxes should they not survive the 7 years. Unfortunately dad died suddenly after 4 years. Mum survived him by 3 years.

As for the trust was it established during  your parents'  joint lifetimes if so was a pre March 2006 settlement?   As to its  general terms  did it  provide  for both parents to occupy  for life , with the property reverting to you and your siblings on 2nd death in equal shares?  Alternatively did the trust only arise on your father' s death and solely attach to his half share with your mother retaining a half share in her name?

The trust was set up in 2013. It provided for both parents to occupy for life. The trust is a bit of a monster - it owns the title of the house, so my parents names were no longer on the deeds. The trust failed (Dad died after 4 years), but as our parents names were no longer on the deeds we are liable for tax. Our parents were trustees, and 2 of the three siblings were trustees (the only reason for this was only 4 trustees were necessary). Our parents had mirror wills leaving everything to eachother.

The point of these questions is if the trust terms were largely  as stated above, the property  ( or part of the property ) was not legally part of your mother's estate on her death, although the tax calculation amalgamates the property  ( or share of ) with her 'free estate' for  IHT purposes .

  If the entire property was in trust,  the property ownership vested absolutely in favour of you and siblings distinct and separate from any liquid  assets in your mother's estate on her death.  You are therefore  dealing with two separate legal entities here. The estate and the now terminated trust. 

Clarification of the  trust questions would be appreciated.

As a  consequence, and contrary to what has been stated so far, this would not be a matter of a purchase of the property from a deceased estate, it would be a relatively straightforward sale by 2 absolute joint owners to  the third.  As such the SDLT and CGT rules for disposals between joint owners will apply. If however only part of the property was subject to trust ( ie your mother had retained her half share) then there is potential for SDLT mitigation by the purchasing sibling, by way of offsetting entitlement to liquid assets of the estate, assuming administration thereof remains ongoing.
this is what we are hoping to do

As to the value of the property that should be utilised by the siblings for the purchase by the third member, you indicate a RICS valuation of £605k discounted by 10% to reflect joint ownership. Was this to reflect joint absolute ownership by the 3 siblings on the termination of the trust on mother's death, or was this as a result  of property being part owned by the trust and part owned by your mother at date of death? Details of the trust requested above should clarify this question.

Be that as it may, RICs valuations often verge on the cautious side so you should obtain a few local estate agent valuations to determine if the RICs valuation is realistic for the purposes of the negotiated sale to the third sibling. Bearing in mind the IHT valuation was agreed at the discounted £550k  figure , an average of say 3 estate agent valuations may help determine a more appropriate sale figure between you.

ok this seems fair

Finally, and in passing there may be a technical question as to whether ( in this specific circumstance) you are bound by the agreed IHT value of £550k  as the start point for the CGT calculation. There has been some debate on a specialist trust forum on this point - per link below

https://trustsdiscussionforum.co.uk/t/co-ownership-discount/23249

Thank you - this has all been very enlightening

I'll try to answer your

OK based on this clarification the trust was a complete nonsense from outset from an IHT point of view.  Specifically, since it provided for both parents to occupy for life ( presumably rent  free) the trust could  never have been IHT effective even if they had both survived 7 years or longer.

Worse still from March 2006, this form of trust attracts the potential for lifetime IHT at the rate of 20% on the value gifted exceeding the joint nil rate band. Thankfully, we can assume the 2013 value of property was comfortably within your parents joint NRBs at that time.

However,  matters could have worsen further still in 2023 when the 10 year anniversary of the trust arose. If the value of the trust property had exceeded the joint NRBs at that time it could have attracted a 10 year IHT charge at 6% of the excess over the NRBs.

Frankly a complete disaster from start to finish, which to my mind should give rise to a legal cause of action for gross negligence against the adviser concerned.

Be that as it may, following your mother's demise the trust immediately came to an end and the two sibling trustees now hold the legal title as ' Bare trustees'  for the absolute benefit of the three siblings in equal shares. 

 As previously indicated this ' bare trust'  containing the entire property is a separate and distinct entity from your mother 's estate.  As a result, the sibling wishing to buy the property  cannot utilise  her share of the remaining cash in the estate, as a means to minimise her SDLT exposure on acquiring the 2/3rd share from her siblings, by way of estate 'offset '. Although the trust was wholly ineffective for the IHT purposes, it did remove legal ownership from your parents respective estates, so this is a simple case of 1 joint owner making a straightforward purchase of the property from the other two.

On a practical issue, since the property is not part of the estate the running costs until sale are a burden on the three sibling owners in equal shares. Council tax maybe the big ticket item, since the usual moratorium of tax being suspended for a deceased estate would not apply here ( the property is not part of the estate). In theory, the property could have been marketed for sale the day after your mother died - there are no hindrances this regard.

Since the sibling who wants to buy has to sell first, the vendor siblings may want to consider how long it would be appropriate for them to pick up a share of the property outgoings whilst awaiting  the eventual sale to complete. Presumably the sibling who wishes to buy will not be prevaricating with regard to her sale?