Obtaining and Selling a Second Home

JohnTbye

Hi, would like some advice on a situation which doesn't seem to be covered anywhere.
I am the next of kin and PoA, and will be the executor of the estate of a long term friend. He is 94, has minimal savings and a house with a value of £150K which he lives in. He has left the house to me and my wife in his will but now wants to transfer the property to us now so that he sees us getting it. He has no terminal illnesses so death may not be imminent. My wife and I own our own property and plan to remain there.
He knows that the house will be sold after he dies and the proceeds will be ours.
By reading online I have gathered that there will be CGT to be paid on the sale as it is our second home but some areas don't seem to be covered. All of the above applies to Scotland. My wife pays no tax and I pay basic rate.
I have a couple of questions.

1. Is there any CGT difference between transferring the house now or after death through the will.
2. Is the gain assumed to be the full house price as I have been gifted the house or is the current market value used as the buy price.
3. When we come to sell, and the house is sold for £150K what would be the CGT for each of us.
4. Any other option open to us.
 Thanks for advice.

user1977

Why is he wanting to transfer the property which he lives in while he's still alive? You can avoid all the CGT-related stuff by just leaving it in his estate.

Stubod

..have you googled "deprivation of assets"??

Keep_pedalling

This would certainly be seen as deliberate deprivation of assets should he need residential care. He would be very foolish to give away his only significant assets. 

The one option you should take is to insist he does not do this. 

JohnTbye

user1977 said:

Why is he wanting to transfer the property which he lives in while he's still alive? You can avoid all the CGT-related stuff by just leaving it in his estate.

I couldn’t find an answer on this, so are you confirming that there would be no CGT if the property was passed on through the will and then sold as a second home.

StarkCouzens

As other's have suggested, I would not allow him to pass this on to you. If he did then a simple transfer of equity via a declaration of trust may suffice. But if he needs care, this may bring up an issue as he has given away and asset and this would be classed as other have said as a deprivation of assets. His care funding may be decined altogether so it's really not worth it.

Generally CGT is not invoked if it's in the will, but there may be some instances where it could be if the property has risen in value since the probate began and ended. I also think that the ruling on this is (in most cases its not due) so my advice to you is to seek guidance from a financial advisor or accountant on the CGT.

user1977

JohnTbye said:

user1977 said:

Why is he wanting to transfer the property which he lives in while he's still alive? You can avoid all the CGT-related stuff by just leaving it in his estate.

I couldn’t find an answer on this, so are you confirming that there would be no CGT if the property was passed on through the will and then sold as a second home.

The relevant tax on the capital value of estates at death is Inheritance Tax, and it sounds like his estate would be too low in value to be liable for that anyway. I can't see any advantage in doing a lifetime transfer and only downsides. The only CGT (if you simply inherited on death) would be if you kept hold of the property and sold it later (on any increase in value between the date of death and the sale).

Is he taking advice from somewhere else or coming up with this cunning plan by himself?

JohnTbye

Thanks everyone for your comments and advice, having read them and understood the various scenarios I will talk to him and convince him to leave the property in his name as there is no benefit for anyone and several negatives in changing ownership now.