CGT Question

jsh99

Hi all,

I've inherited half my mother's house.  The other half is my half brothers and he still lives there and has an IPDT so he can stay as long as he wants (which is fine)

He has no will, yes I've tried but it was a hard slog getting LPA and despite everything I have done/doing for him he seems to think I am only after his money.

Anyway as his only close relative I think I will inherit his half on his passing.

If I then sell the property am I right in thinking that I will only pay CGT on the gain in value on the half I already have in the IPDT?  Or will I have to pay CGT on the whole new value when he passes?


Also is there any IHT allowance for siblings or will I have to pay on the whole of his estate?  I know about for spouses/children allowances.


Thanks.

Keep_pedalling

As he is the sole beneficiary of the IPDI trust the whole house will form part of his estate for IHT purposes and his estate will only be entitled to the standard NRB. 

CGT is also based on beneficial ownership rather than legal ownership so you should have none to pay.

If you died before your brother do you have children who would inherit what would have gone to you? If not did your mother’s will handle that situation?

jsh99

Keep_pedalling said:

As he is the sole beneficiary of the IPDI trust the whole house will form part of his estate for IHT purposes and his estate will only be entitled to the standard NRB. 

CGT is also based on beneficial ownership rather than legal ownership so you should have none to pay.

If you died before your brother do you have children who would inherit what would have gone to you? If not did your mother’s will handle that situation?

So the whole house will be his estate?  My mother did the half to me in an IPDT to protect that half of it from IHT - so that was pointless then.  So 40% of the whole house will go to HMRC!  

If he were to approve a variation to the IPDT before the 2 years does it make any difference?

CGT at 24% would have been preferable!

I have no children, there is nothing in mothers will to cover what happens if I die before my half brother.  He has no children.   I guess our cousins would inherit between them, or does my husband come before them?

RAS

You've got this wrong.

Whilst the whole house may be part of his estate of IHT, you inherit half the value of the house and the IPDI trust protects you from CGT, SDLT, benefits issues. Even if he married tomorrow, you'd still inherit half the house.

As K_p explained, do you have a will identifying what happens to your portion of the house if you die first. 

How much is the house worth?

Keep_pedalling

jsh99 said:

Keep_pedalling said:

As he is the sole beneficiary of the IPDI trust the whole house will form part of his estate for IHT purposes and his estate will only be entitled to the standard NRB. 

CGT is also based on beneficial ownership rather than legal ownership so you should have none to pay.

If you died before your brother do you have children who would inherit what would have gone to you? If not did your mother’s will handle that situation?

So the whole house will be his estate?  My mother did the half to me in an IPDT to protect that half of it from IHT - so that was pointless then.  So 40% of the whole house will go to HMRC!  

No, the first £325k of his estate would be exempt. IPDI trusts are extreamly tax efficient for surviving spouses but not so much for non spouses. Legal ownership of your share is with the trust, and you don’t actually inherit until the trust is wound up, either on his death or when he no longer needs the house( moving into care for instance) 

If he were to approve a variation to the IPDT before the 2 years does it make any difference?

A deed of variation that gets rid of the trust and gives you ownership would reduce the value of his estate for IHT purposes but obviously would increase yours. The downside of this for your brother is that it significantly lowers his long term security in the event of your death, bankruptcy or divorce. These type of trust have never been mechanisms for saving IHT they are for protecting the beneficiary’s interest and the remainderman’s (you) eventual inheritance.

As it is your brother who would have to make the variation it seems that this is an unlikely solution

CGT at 24% would have been preferable!

I have no children, there is nothing in mothers will to cover what happens if I die before my half brother.  He has no children.   I guess our cousins would inherit between them, or does my husband come before them?

My understanding (after a bit of Googling) is that where a sole remainderman predeceases the life tenant (your brother), on the death of the life tenant the trust goes to the estate of the remainderman not to any other relative. 

In your shoes I would review your current will with a STEP qualified solicitor to make sure it covers this situation in the way you would wish, and if it doesn’t then make a new one.

jsh99

RAS said:

You've got this wrong.

Whilst the whole house may be part of his estate of IHT, you inherit half the value of the house and the IPDI trust protects you from CGT, SDLT, benefits issues. Even if he married tomorrow, you'd still inherit half the house.

As K_p explained, do you have a will identifying what happens to your portion of the house if you die first. 

How much is the house worth?

Value at Probate was 550,000
Very unlikely to marry - he's 76 and never had a partner and always lived in the property with mother.

I am confused.

So if he died tomorrow I'd have to pay 40% IHT on the lot - 550,000? No CGT though if it sold for 550,000.  

If he dies in 10 years and the house is sold for 650,000 I'd still pay 40% of 650,000? 
OR
If he dies in 10 years and the house is sold for 650,000 I'd pay 40% on his 'half' (325,000) and CGT of 24% on the half that I inherited when my mother died? (275,000 increase to 325,000 so 50,000 gain - less the 3,000 yearly allowance, so 47,000 gain)


I'm not interested in SDLT or benefits at the moment as I own (mortgaged) my own home and earn too much for benefits.  Although of course who knows what state I'll be in by the time he passes.

My mother was advised to do the IPDI as it would stop me having to pay IHT on the half she gave me when my brother passed.  I understand nothing to be done on my brothers half, that was understood from the start but no one explained even with the IPDI that I'd have to pay IHT on the whole house once he passed - I was there when the advise was given and this was the main reason she did the IPDI because they said it would stop me paying IHT on her half when my brother passed but allowed him to live there.


I have no children, there is nothing in mothers will to cover what happens if I die before my half brother.  He has no children.   I guess our cousins would inherit between them, or does my husband come before them?

poseidon1

jsh99 said:

Hi all,

I've inherited half my mother's house.  The other half is my half brothers and he still lives there and has an IPDT so he can stay as long as he wants (which is fine)

He has no will, yes I've tried but it was a hard slog getting LPA and despite everything I have done/doing for him he seems to think I am only after his money.

Anyway as his only close relative I think I will inherit his half on his passing.

If I then sell the property am I right in thinking that I will only pay CGT on the gain in value on the half I already have in the IPDT?  Or will I have to pay CGT on the whole new value when he passes?


Also is there any IHT allowance for siblings or will I have to pay on the whole of his estate?  I know about for spouses/children allowances.


Thanks.

I understand from a previous post from you that:
1) Half the house previously owned by your mother pass to an IPDI trust for your sibling, which will pass to you on his death
2) Your sibling co owned the other half with your mother, and continues to retain this in his personal ownership.


You indicate he has made no will so on his eventual death, the 50% of the value of the house in the trust  will be added to his personal assets ( his half share of the house plus anything else)  and if that total exceeds his NRB ( £325k), 40% IHT will be assessable on the excess.

 The residence nil rate band of £175k is not available for gifts of the home between siblings and in fact there are no special tax exemptions for assets passing between siblings.

As for CGT, you are correct you will only pay tax on any gain accruing on the entire property following your siblings eventual death. If sold prior to his death ( see below) his main residence exemption should avoid any lifetime CGT.

As for your options to mitigate IHT, the only possibility was to vary the will to to get rid of the IPDI trust and for your mother's half share to pass direct to you. However the problem with that was covered in my previous post back in November per thread below- I assume nothing has changed to make that  more viable?

https://forums.moneysavingexpert.com/discussion/6571423/immediate-post-death-interest-anything-i-can-do#latest

In any event from what you said previously, nursing home fees ( at £1700 per week) are eroding your siblings personal estate, so the longer he lives the smaller his taxable estate becomes, potentially leaving just the trust fund if the property is sold to release his personal half share for nursing home costs.

With all due respect, and in view of all your older posts, you do appear to be going around in circles on this issue.

jsh99

poseidon1 said:

jsh99 said:

Hi all,

I've inherited half my mother's house.  The other half is my half brothers and he still lives there and has an IPDT so he can stay as long as he wants (which is fine)

He has no will, yes I've tried but it was a hard slog getting LPA and despite everything I have done/doing for him he seems to think I am only after his money.

Anyway as his only close relative I think I will inherit his half on his passing.

If I then sell the property am I right in thinking that I will only pay CGT on the gain in value on the half I already have in the IPDT?  Or will I have to pay CGT on the whole new value when he passes?


Also is there any IHT allowance for siblings or will I have to pay on the whole of his estate?  I know about for spouses/children allowances.


Thanks.

I understand from a previous post from you that:
1) Half the house previously owned by your mother pass to an IPDI trust for your sibling, which will pass to you on his death
2) Your sibling co owned the other half with your mother, and continues to retain this in his personal ownership.


You indicate he has made no will so on his eventual death, the 50% of the value of the house in the trust  will be added to his personal assets ( his half share of the house plus anything else)  and if that total exceeds his NRB ( £325k), 40% IHT will be assessable on the excess.

 The residence nil rate band of £175k is not available for gifts of the home between siblings and in fact there are no special tax exemptions for assets passing between siblings.

As for CGT, you are correct you will only pay tax on any gain accruing on the entire property following your siblings eventual death. If sold prior to his death ( see below) his main residence exemption should avoid any lifetime CGT.

As for your options to mitigate IHT, the only possibility was to vary the will to to get rid of the IPDI trust and for your mother's half share to pass direct to you. However the problem with that was covered in my previous post back in November per thread below- I assume nothing has changed to make that  more viable?

https://forums.moneysavingexpert.com/discussion/6571423/immediate-post-death-interest-anything-i-can-do#latest

In any event from what you said previously, nursing home fees ( at £1700 per week) are eroding your siblings personal estate, so the longer he lives the smaller his taxable estate becomes, potentially leaving just the trust fund if the property is sold to release his personal half share for nursing home costs.

With all due respect, and in view of all your older posts, you do appear to be going around in circles on this issue.

OK OK!

I think I just never understood the implication that my 'half' would actually count as his because of the IPDI.

Mum wanted me to have her half - but let my brother live there as long as he wanted, not for all of it to be his, because she wanted me to live there eventually.

Sigh what a bloody mess.

poppystar

jsh99 said:

poseidon1 said:

Mjsh99 said:

Hi all,

I've inherited half my mother's house.  The other half is my half brothers and he still lives there and has an IPDT so he can stay as long as he wants (which is fine)

He has no will, yes I've tried but it was a hard slog getting LPA and despite everything I have done/doing for him he seems to think I am only after his money.

Anyway as his only close relative I think I will inherit his half on his passing.

If I then sell the property am I right in thinking that I will only pay CGT on the gain in value on the half I already have in the IPDT?  Or will I have to pay CGT on the whole new value when he passes?


Also is there any IHT allowance for siblings or will I have to pay on the whole of his estate?  I know about for spouses/children allowances.


Thanks.

I understand from a previous post from you that:
1) Half the house previously owned by your mother pass to an IPDI trust for your sibling, which will pass to you on his death
2) Your sibling co owned the other half with your mother, and continues to retain this in his personal ownership.


You indicate he has made no will so on his eventual death, the 50% of the value of the house in the trust  will be added to his personal assets ( his half share of the house plus anything else)  and if that total exceeds his NRB ( £325k), 40% IHT will be assessable on the excess.

 The residence nil rate band of £175k is not available for gifts of the home between siblings and in fact there are no special tax exemptions for assets passing between siblings.

As for CGT, you are correct you will only pay tax on any gain accruing on the entire property following your siblings eventual death. If sold prior to his death ( see below) his main residence exemption should avoid any lifetime CGT.

As for your options to mitigate IHT, the only possibility was to vary the will to to get rid of the IPDI trust and for your mother's half share to pass direct to you. However the problem with that was covered in my previous post back in November per thread below- I assume nothing has changed to make that  more viable?

https://forums.moneysavingexpert.com/discussion/6571423/immediate-post-death-interest-anything-i-can-do#latest

In any event from what you said previously, nursing home fees ( at £1700 per week) are eroding your siblings personal estate, so the longer he lives the smaller his taxable estate becomes, potentially leaving just the trust fund if the property is sold to release his personal half share for nursing home costs.

With all due respect, and in view of all your older posts, you do appear to be going around in circles on this issue.

OK OK!

I think I just never understood the implication that my 'half' would actually count as his because of the IPDI.

Mum wanted me to have her half - but let my brother live there as long as he wanted, not for all of it to be his, because she wanted me to live there eventually.

Sigh what a bloody mess.

All of it isn’t his. You have inherited half. You have a legal interest in half but he has a beneficial interest in the whole because he is living there. You will still get your half when your brother dies, assuming he predeceases you. 

If you had been left the half with no IPDI trust the house would probably have to have been sold at that point to pay you. Or, if you let him live there, you would have been responsible for half the maintenance and would eventually have been subject to CGT on your half. 

You won’t be paying the IHT, it is your brother’s estate that will. Best to think if it that way. Because he is single with no direct descendants he will only have an allowance of the basic £325k which it sounds like will be exceeded by the house and any other assets he has. So you will inherit something from an estate that has paid IHT but you won’t have any CGT liability. 

poseidon1

poppystar said:

jsh99 said:

poseidon1 said:

Mjsh99 said:

Hi all,

I've inherited half my mother's house.  The other half is my half brothers and he still lives there and has an IPDT so he can stay as long as he wants (which is fine)

He has no will, yes I've tried but it was a hard slog getting LPA and despite everything I have done/doing for him he seems to think I am only after his money.

Anyway as his only close relative I think I will inherit his half on his passing.

If I then sell the property am I right in thinking that I will only pay CGT on the gain in value on the half I already have in the IPDT?  Or will I have to pay CGT on the whole new value when he passes?


Also is there any IHT allowance for siblings or will I have to pay on the whole of his estate?  I know about for spouses/children allowances.


Thanks.

I understand from a previous post from you that:
1) Half the house previously owned by your mother pass to an IPDI trust for your sibling, which will pass to you on his death
2) Your sibling co owned the other half with your mother, and continues to retain this in his personal ownership.


You indicate he has made no will so on his eventual death, the 50% of the value of the house in the trust  will be added to his personal assets ( his half share of the house plus anything else)  and if that total exceeds his NRB ( £325k), 40% IHT will be assessable on the excess.

 The residence nil rate band of £175k is not available for gifts of the home between siblings and in fact there are no special tax exemptions for assets passing between siblings.

As for CGT, you are correct you will only pay tax on any gain accruing on the entire property following your siblings eventual death. If sold prior to his death ( see below) his main residence exemption should avoid any lifetime CGT.

As for your options to mitigate IHT, the only possibility was to vary the will to to get rid of the IPDI trust and for your mother's half share to pass direct to you. However the problem with that was covered in my previous post back in November per thread below- I assume nothing has changed to make that  more viable?

https://forums.moneysavingexpert.com/discussion/6571423/immediate-post-death-interest-anything-i-can-do#latest

In any event from what you said previously, nursing home fees ( at £1700 per week) are eroding your siblings personal estate, so the longer he lives the smaller his taxable estate becomes, potentially leaving just the trust fund if the property is sold to release his personal half share for nursing home costs.

With all due respect, and in view of all your older posts, you do appear to be going around in circles on this issue.

OK OK!

I think I just never understood the implication that my 'half' would actually count as his because of the IPDI.

Mum wanted me to have her half - but let my brother live there as long as he wanted, not for all of it to be his, because she wanted me to live there eventually.

Sigh what a bloody mess.

All of it isn’t his. You have inherited half. You have a legal interest in half but he has a beneficial interest in the whole because he is living there. You will still get your half when your brother dies, assuming he predeceases you. 

If you had been left the half with no IPDI trust the house would probably have to have been sold at that point to pay you. Or, if you let him live there, you would have been responsible for half the maintenance and would eventually have been subject to CGT on your half. 

You won’t be paying the IHT, it is your brother’s estate that will. Best to think if it that way. Because he is single with no direct descendants he will only have an allowance of the basic £325k which it sounds like will be exceeded by the house and any other assets he has. So you will inherit something from an estate that has paid IHT but you won’t have any CGT liability. 

Useful to be aware brother now in nursing home. House may need to be sold to release his capital to help meet those escalating costs. Longer he lives the lower his eventual taxable estate.

jsh99

poseidon1 said:

Useful to be aware brother now in nursing home. House may need to be sold to release his capital to help meet those escalating costs. Longer he lives the lower his eventual taxable estate.

He keeps saying he still wants to go home.......... so I am a bit stuck at the moment - till his accessible money runs out anyway.  Then he will have to make a hard choice.

Anyway I am going to stop worrying about it - because otherwise I'll make myself ill again like I did trying to care for my mother, then I'll wind up dead before him anyway.