Dividing an estate in two where there is more cash than property value

badplasterer

Apologies, this is a bit of a post bump, but didn't get a lot of response last time and interested to hear any views before proceeding.

I'm the executor dealing with my mum's estate.  She had a house she owned outright and and cash/investments worth a bit more than the value of the house.

There are two beneficiaries, myself and my sister, the will is a very straightforward 50/50 split between us.  Probate has been granted, cash and investments called in, and I'm ready to distribute.

We have decided I will keep the house while the equivalent cash value would go to my sister, with the remaining balance split 50/50.  We are both very happy with that arrangement.

I already live in my own house so the inherited house will be an investment property and rented out.

Will splitting the estate this way ensure there is no liability for stamp duty?  I'm not having to "buy out" 50% of the house with my own funds, so none payable? 

What is the best way to record all this?  I'm thinking a written agreement that we both sign detailing the property, the agreed value etc, plus these details all noted in the executor final account.   I'd rather DIY if possible, don't really want to get solicitors involved as everyone concerned is very amicable.

I've had a bit of a search but all other examples I found seem to involve one party having to inject their own cash to buy out the other party. That's not the case here, but I don't imagine our situation is particularly uncommon.

Perhaps I'm just over thinking it and should just get on with it but would appreciate any others experience, thanks

(This is in England, if that makes a difference)

AP3

No experience, but it seems that you can do it yourself, and as you're just changing ownership (not selling/buying) I doubt that stamp duty would be payable, but happy to be corrected on this.

Information available here, which mentions inherited properties: https://www.gov.uk/registering-land-or-property-with-land-registry/transfer-ownership-of-your-property

lisyloo

Did the will specify you each get half the house? Or did it say 50% of the total estate?

lisyloo

AP3 said:

No experience, but it seems that you can do it yourself, and as you're just changing ownership (not selling/buying) I doubt that stamp duty would be payable, but happy to be corrected on this.

Information available here, which mentions inherited properties: https://www.gov.uk/registering-land-or-property-with-land-registry/transfer-ownership-of-your-property

Stamp duty might be payable if the sister inherited 50% of the property and the OP is now buying 50% from the sister rather than inheriting it directly.

Linton

lisyloo said:

AP3 said:

No experience, but it seems that you can do it yourself, and as you're just changing ownership (not selling/buying) I doubt that stamp duty would be payable, but happy to be corrected on this.

Information available here, which mentions inherited properties: https://www.gov.uk/registering-land-or-property-with-land-registry/transfer-ownership-of-your-property

Stamp duty might be payable if the sister inherited 50% of the property and the OP is now buying 50% from the sister rather than inheriting it directly.

Surely the OP as executor simply transfers the ownership of the house from the deceased to themself as beneficiary with no Stamp Duty.

Should there be any issues if the will explicitly states the house is to be sold and divided a Deed of Variation to correspond to reality could be agreed by both the sister and the OP.  This would formally document the sister's acceptance of the house value.

badplasterer

Thanks for your replies.
The will is quite generic, no individual item/property etc is mentioned. Just a statement along the lines of giving the entire estate to the trustees to sell and then distribute.

I suppose what I'd thought about doing (producing a written agreement detailing what has been done) is effectively a Deed of Variation.

badplasterer

lisyloo said:

AP3 said:

No experience, but it seems that you can do it yourself, and as you're just changing ownership (not selling/buying) I doubt that stamp duty would be payable, but happy to be corrected on this.

Information available here, which mentions inherited properties: https://www.gov.uk/registering-land-or-property-with-land-registry/transfer-ownership-of-your-property

Stamp duty might be payable if the sister inherited 50% of the property and the OP is now buying 50% from the sister rather than inheriting it directly.

I think doing what I plan to do would prevent this situation.  If we divided the cash 50% each, and each held a share in the property, which I then bought out with my share of the cash, then yes,  I believe stamp duty would be payable. 

But by dividing the assets prior to distribution, (with a deed of variation as has been mentioned) no money changes hands between the beneficiaries, so no stamp duty liability

poseidon1

You do not indicate how long ago your mother passed and whether the property has gone up in value since then.

Since what you propose is indeed a variation  whereby you give  up a share of cash in exchange for you taking sister's share of the property, your efforts at a DIY variation may inadvertently trigger a CGT liabilty on your sister unless the variation is drafted with the correct CGT election embedded therein.

See below HMRC DOV checklist with specific reference to note 5 on page 2.

https://assets.publishing.service.gov.uk/media/5a7df4d040f0b6230268838d/IOV2.pdf

Despite your objection to using a solicitor to get this right ( expressed in a previous post), seeking guidance from this forum on how to draft and incorporate the relevant cgt election in the variation maybe unwise.

poppystar

Write up the final estate accounts showing the distribution of assets - property to you plus cash and larger cash amount to sibling. Then sign and date that and get written agreement to the accounts from sibling. And only then change the deeds of the property to reflect your ownership - so going straight to you after the dated and agreed accounts. That will provide a good account trail if needed in future. 

I don’t see why you would need a DoV as the distribution of the value of the estate is not changing. You are keeping rather than selling the house but still doing the 50:50 split of estate assets.

poseidon1

poppystar said:

Write up the final estate accounts showing the distribution of assets - property to you plus cash and larger cash amount to sibling. Then sign and date that and get written agreement to the accounts from sibling. And only then change the deeds of the property to reflect your ownership - so going straight to you after the dated and agreed accounts. That will provide a good account trail if needed in future. 

I don’t see why you would need a DoV as the distribution of the value of the estate is not changing. You are keeping rather than selling the house but still doing the 50:50 split of estate assets.

Except it would not be 50:50 if property had increased in the period following death of the deceased. There is a reason for the CGT election system for variations, which is to address this specific scenario.  'Good' accounting does not equate to or replace  correct tax compliance.

Presumably OP will be using probate value of the property for the purposes of determining the split between himself and sister.

Would your answer be the same if instead of a property, this was a stockmarket portfolio OP was swapping for cash, regardless of the possible portfolio appreciation since death?

bobster2

poseidon1 said:

You do not indicate how long ago your mother passed and whether the property has gone up in value since then.

Since what you propose is indeed a variation  whereby you give  up a share of cash in exchange for you taking sister's share of the property, your efforts at a DIY variation may inadvertently trigger a CGT liabilty on your sister unless the variation is drafted with the correct CGT election embedded therein.

See below HMRC DOV checklist with specific reference to note 5 on page 2.

https://assets.publishing.service.gov.uk/media/5a7df4d040f0b6230268838d/IOV2.pdf

Despite your objection to using a solicitor to get this right ( expressed in a previous post), seeking guidance from this forum on how to draft and incorporate the relevant cgt election in the variation maybe unwise.

Does this apply if the property was not specified in the will - and they are both just residual beneficiaries? i.e. neither has a specified share in the property specifically.