CGT - payable from when in these circumstance?

bicyclist

I’m trying to figure out if CGT is likely due on an upcoming inherited property sale (and if so, from when). Originally we (two beneficiaries) thought we’d be liable for CGT covering the 10 years we’ve been on the deeds as named/joint owners. However, querying ChatGPT it suggests we may only be liable from the point of probate to sale date. Of course we will engage an actual professional, but wanted to get some idea up front.

The details are:

1. Mum (widow) passed almost a year ago. Apart from a small bequest to grandchildren, her will states everything to be split between us two children.
2. The house was owned outright (not rented, no mortgage, freehold).
3. Our names (the two children) were added to the property deeds (via a TR1) 10 years ago (so a total of three names).
4. Mum made her will 6 months before the TR1 was completed, around the time of dad’s passing (he died intestate with almost no assets).

TR1:

Box 8. Consideration — The transfer is not for money or anything that’s a monetary value.

Box 9. The transferor transfers with — Limited title guarantee. 

Box 10. Declaration of trust. The transferee is more than one person and — They are to hold the property on trust.

Box 11. Additional provisions — (Empty)

There are no other documents. Probate was applied for and granted quite quickly last September. No IHT was payable - total value of the estate was below the threshold.

• The property was solely mum’s home (no business use).
• We did not contribute to any outgoings or receive any benefit (monetary or otherwise) from the property.
• We did not live there (only mum did).

Is this enough info to make an educated guess? If more details are required, please ask. Thanks.

Keep_pedalling

When you say no IHT was due, did you take into account the whole house formed part of her estate for IHT purposes not just 1/3rd of it? This is because the shares she gifted would be classed as gifts with reservation of benefit.

As for CGT you and your sibling will be liable for CGT on the increase in the value of your shares from the date you were gifted them and the sale price of your share. CGT should not apply to your mother’s share unless you undervalued it for probate purposes.

bicyclist

https://forums.moneysavingexpert.com/discussion/comment/82027664#Comment_82027664

Yes, we based our IHT calculation on the whole house (not knowing any better at the time).

poseidon1

https://forums.moneysavingexpert.com/discussion/6671616/cgt-payable-from-when-in-these-circumstance

In box 10 ( below) there are options for the terms of the trust. Options were joint tenants , tenants in common or something else. Which option applied in your case ?

https://assets.publishing.service.gov.uk/media/65afbf6870218e000cb41f89/TR1__2023-08-29_ct.pdf#:~:text=Enter%20the%20overseas%20entity%20ID,(Transparency%20and%20Enforcement)%20Act

bicyclist

https://forums.moneysavingexpert.com/discussion/comment/82027765#Comment_82027765

Third option: "They are to hold the property on trust:" Although there is a colon after it, there is nothing further in that section.

poseidon1

https://forums.moneysavingexpert.com/discussion/comment/82027808#Comment_82027808

That strongly suggests a declaration of trust document was drawn up, that would not have been necessary if an outright share of ownership of the property was intended for and your sibling. The first two options of box 10 would have sufficed for the purposes of outright ownership.

There is therefore the possibility you and your siblings were added as mere co trustees of the property rather than immediate beneficiaries along side your mother.

You say your mother's will preceded the TR1, and presumably was drawn up by a solicitor?

If so is the solicitor concerned, available to advise whether your mother varied her legal rights under intestacy by virtue of a declaration of trust which perhaps put a share of the home into a trust intially for her own benefit for life , with that property share then reverting to you both on her death.

Such a declaration of trust would be a document separate and distinct from the will, and would be beneficial for you both in terms of eliminating CGT exposure during your mother's lifetime.

bicyclist

https://forums.moneysavingexpert.com/discussion/comment/82027849#Comment_82027849

Yes, mum’s will preceded the TR1 by about 6 months and was drawn up by a solicitor. 

In fact, I’ve just found the letter the solicitors sent mum confirming the grant of probate for my father (he passed three days after mum made her will). In the letter they add that they will “prepare the documents to put the property into the name of you and your children.” Two months later the TR1 was completed.

I have been in touch with the solicitors previously. Once to ask for mum’s original will (which they posted to me), and later to ask if there were any more documents associated with mum. They said ”we do not hold any other documentation in relation to your mother’s property or the transfer”.

poseidon1

https://forums.moneysavingexpert.com/discussion/comment/82027875#Comment_82027875

There's a problem here which perhaps point to possible solicitor negligence.

If the TR1 accruately reflects that some form of trust arrangement was intended, where is the declaratory document and what did it state?

As I said a simple transfer to you and your sibling is covered by the first 2 options. By ticking the 3rd box there is a requirement to outline the exact terms of the trust, which could quite literally be anything.

Suggest you go back to the solicitors and make a point blank request for clarification as to why they ticked the 3rd box if no trust was intended.

At this point neither you or us here in the forum have any idea whether you had beneficial ownership of the property via the the TR1 or legal ownership with important trust limitations.

Incidentally since your father died intestate, I would have expected detailed correspondence from the solicitors setting out the rights under intestacy due to your mother and you her children.

You will see in the link below that the statutory legacy due to your mother 10 years ago would have been the first £250k of the estate , with anything above needing to be 50% shared with her children.

https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm12122

In this regard what was the approximate value of the house at that time, and if in excess of £250k what was proposal for you her children to vary/compromise your entitlements?

EDIT

I note your father died with little or no assets, but did he have any financial interest in the house or was your mother always sole owner during the marriage?

bicyclist

https://forums.moneysavingexpert.com/discussion/comment/82027934#Comment_82027934

I can’t find anything relating to dad’s intestacy. We have figured out the house would have been worth around £220k-£240k at that time. 

Also (may or may not be relevant), I have found a Notice of Severance document dated four years before dad passed, converting their Beneficial Joint Tenancy into a Tenancy in Common.

DRS1

Hmm why would you sever the joint tenancy if you didn't also make a will?

silvercar

https://forums.moneysavingexpert.com/discussion/comment/82028121#Comment_82028121

Maybe the intention was to make a will, that never happened.

Friend recently remarried to someone considerably wealthier. Both have kids from first marriages and he also had an ex- wife that was still receiving some financial support. They spent ages agreeing a pre-nup that all sides were happy with. 3 months after the wedding he had a heart attack and died. Previous will was 20 ears old and made invalid by subsequent marriage. No new will. Something they had intended to do post wedding, but hadn’t got around to.