Inherited 50% Share of Home with Sibling Who Lives in the House

Keep_pedalling

Did your mother leave any other significant assets? If she did you could distribute the estate in a different way. For example if she also left £50k in savings you could take all the cash, and let your sister have a larger share of property.

Do you already own your own home? 

Bookworm105

Donnywhite1801 said:

No, probate going through at the moment so not looking to do something straight away, just looking at options.

CGT will be due on the difference between probate value and what it (finally) sells for becuase it is not your main home

as it appears no inheritance tax has been paid by mother's estate HMRC have not accepted ("ascertained")  the probate value for CGT purposes and may, at their discretion, use a different figure to yours when it comes to your CGT declaration. You would then need to argue your value versus theirs if you do not like their figure (best done with support from a professional valuer).

if your sibling purchases 30% (eg via a mortgage in her own name as you are thinking) then you will be liable for CGT on that 30% at the point she buys it. You will not "dispose of" (sell) that 30% tax free unless the gain is less than your CGT allowance of (currently) £3,000

in that instance, because you and her are "connected persons" (family!) the gain will not be based on the price she pays you, it will be based on the market value of a 30% share of a property that is lived in by someone else. Coming up with that value would best be left to a professional value (surveyor specifically holding the valuation qualification, not a run of the mill high street estate agent) 
30% value will not be 3/10ths of the price of the whole house, it will be less because of the minority stake in a shared house....

when you sell the remaining 20% , the same will happen if purchased by sibling. However if sold on the open market then, and only then, would price paid apply.

as sibling (will) lives in the property from date of inheritance to date of sale then she does not have any CGT to pay as it is her main / only home and is thus gets full relief on her gain 

Donnywhite1801

Keep_pedalling said:

Did your mother leave any other significant assets? If she did you could distribute the estate in a different way. For example if she also left £50k in savings you could take all the cash, and let your sister have a larger share of property.

Do you already own your own home? 

No it was just the house that is significant.  I have my own home (mortgaged).

silvercar

You can’t get a mortgage on 30% of a property. You get a mortgage on the whole property as the lender holds the charge against the title deeds for the property. As co-owner you would need to go on the mortgage, which is undesirable to be liable for the mortgage if your sister failed to pay.

Your sister needs to get a mortgage for 50% of the value to buy you out. If that isn’t possible she could get a mortgage for say 30% of the value and then you put a second charge on the property for the remaining 20%. So the property becomes hers, but you have a charge for 20% of its value and she has a mortgage for 30% of the value. You both could have a legal agreement as to when a sale would be needed, or when she needs to buy out your 20%. You could agree an interest rate on the 20% if you wished.

Donnywhite1801

Bookworm105 said:

Donnywhite1801 said:

No, probate going through at the moment so not looking to do something straight away, just looking at options.

CGT will be due on the difference between probate value and what it (finally) sells for becuase it is not your main home

as it appears no inheritance tax has been paid by mother's estate HMRC have not accepted ("ascertained")  the probate value for CGT purposes and may, at their discretion, use a different figure to yours when it comes to your CGT declaration. You would then need to argue your value versus theirs if you do not like their figure (best done with support from a professional valuer).

if your sibling purchases 30% (eg via a mortgage in her own name as you are thinking) then you will be liable for CGT on that 30% at the point she buys it. You will not "dispose of" (sell) that 30% tax free unless the gain is less than your CGT allowance of (currently) £3,000

in that instance, because you and her are "connected persons" (family!) the gain will not be based on the price she pays you, it will be based on the market value of a 30% share of a property that is lived in by someone else. Coming up with that value would best be left to a professional value (surveyor specifically holding the valuation qualification, not a run of the mill high street estate agent) 
30% value will not be 3/10ths of the price of the whole house, it will be less because of the minority stake in a shared house....

when you sell the remaining 20% , the same will happen if purchased by sibling. However if sold on the open market then, and only then, would price paid apply.

as sibling (will) lives in the property from date of inheritance to date of sale then she does not have any CGT to pay as it is her main / only home and is thus gets full relief on her gain 

Thanks for taking the time to provide the above info, much appreciated although not sure I understand it all

So, if we basically sold it now and took 50% each, there is no inheritance tax as it's below the threshold and no CGT tax for either to pay, so long as the value is the same as the probate value - is that correct?  

If my sister bought me out, either in full or just 30% of my 50%, then I would be liable for tax on the full 30% value or just the difference between 30% of the probate value and 30% of the value at the time of the mortgage being arranged?

Donnywhite1801

silvercar said:

You can’t get a mortgage on 30% of a property. You get a mortgage on the whole property as the lender holds the charge against the title deeds for the property. As co-owner you would need to go on the mortgage, which is undesirable to be liable for the mortgage if your sister failed to pay.

Your sister needs to get a mortgage for 50% of the value to buy you out. If that isn’t possible she could get a mortgage for say 30% of the value and then you put a second charge on the property for the remaining 20%. So the property becomes hers, but you have a charge for 20% of its value and she has a mortgage for 30% of the value. You both could have a legal agreement as to when a sale would be needed, or when she needs to buy out your 20%. You could agree an interest rate on the 20% if you wished.

That sounds pretty much the scenario I'm suggesting

Hoenir

If your sister can only afford 30% of your 50% share of the property now. Then how is she going to purchase the remaining 70% in the future. Simply kicks the can down the road and doesn't resolve a major obstacle. 

DE_612183

Hoenir said:

If your sister can only afford 30% of your 50% share of the property now. Then how is she going to purchase the remaining 70% in the future. Simply kicks the can down the road and doesn't resolve a major obstacle. 

She will already own 50% - it will just be an additional 20% in the future...

Donnywhite1801

Hoenir said:

If your sister can only afford 30% of your 50% share of the property now. Then how is she going to purchase the remaining 70% in the future. Simply kicks the can down the road and doesn't resolve a major obstacle. 

As mentioned on the previous post, she already owns 50% so would not need to buy 70% of it.  It would also be based on an agreement to sell within 10 years, either for her to buy out the remaining 20% or sold completely to a third party, but means she can still live there and her share would increase in value as the house price increases (hopefully).

RHemmings

Just a question: if the house was sold, would your sister and nephew be able to afford a smaller property which they could own 100% with an affordable mortgage? But, still be suitable for their needs? 

My reason for asking is to understand whether the preference for the OP's sister and nephew to stay in the house is one of simple preference, or if it's a need.