Can an Estate Be Divided to Minimise SDLT in England?

ThursdayNext1984

My brother and I have inherited my dad’s estate after his death last year. Probate has been granted and IHT has been paid. The net estate (after IHT and some cash legacies) consists of a house valued at £600,000 and £300,000 in cash and equivalents.

The will divides the estate equally between us. There is no mortgage. My understanding is that I will inherit £300,000 of property and £150,000 in cash and my brother will inherit the same. I wish to buy out my brother, so I’ll need to pay him £300,000, which will incur an SDLT charge of £5,000 as I do not own another property.

The estate isn’t large enough to leave the house entirely to me and give him equivalent cash. However, I would like to know whether I can receive my £450,000 share entirely in property with my brother inheriting £150,000 in property and £300,000 in cash and equivalents. I would then be able to buy his £150,000 share of the property and incur an SDLT charge of £500.

Is this possible? If so, how would I go about doing this? Can the executors just divide the estate this way or could a deed of variation achieve this? We will be varying the will to add an additional cash legacy (taken into account with my figures), so the cost of the variation isn’t a concern. Are there any other issues that would mean this isn’t worthwhile?

Thank you

born_again

Have you raised your plan with your brother to see what he has to say on the matter?

ThursdayNext1984

Yes, we’ve agreed that I’ll buy his share

silvercar

Research 'deed of variation' this allows you both to vary the will as long as you all agree. It needs to be completed within 2 years of death. It doesn't need to be anything fancy, you could just write a letter that you both sign or get AI to draft something.

This would allow you to do this: "

However, I would like to know whether I can receive my £450,000 share entirely in property with my brother inheriting £150,000 in property and £300,000 in cash and equivalents.

"

Keep_pedalling

If the will simply give each beneficiary 50% of the estate there should be no need for a DoV the estate can be distributed so that the OPs sibling gets all the cash so they only need to buy out a smaller portion of the house.

saajan_12

In short yes, if the estate is a 600k property and 300k cash in the residual estate, dividing that in half means 450k value each, however that's decided is up to the executor. It doesn't have to be each component in half. The executor could just divide it as you getting all property and brother getting mostly cash.

If thewill specifically leaves half of each to you then you can still agree a deed of variation on the will.

Ultimately you should only need to buy out 150k of the house.

Bigphil1474

If the will divides the estate between you, you can split it how you want if you are executors. My dad's estate divided everything between the 5 of us but we just decided to sell the house. One of the beneficiaries took cash early on instead of waiting for the house to sell, the rest of us took a bit less cash and shared the house sale proceeds. Of the 5 of us, me and one other were executors.

SDLT_Geek

https://forums.moneysavingexpert.com/discussion/6685805/can-an-estate-be-divided-to-minimise-sdlt-in-england

This sounds very doable, without a deed of variation. It can work by an "appropriation" of assets to meet the entitlement under the estate. An "appropriation" is dealt with by the executors. As you say, using this structure can result in a significant saving of SDLT.

Well done for putting the question so clearly by the way.

HouseHuntingAmy

This is a really useful thread - I'd never heard of an appropriation before. The bit that clicked for me is that SDLT is charged on what you actually pay for the share you're buying, so sorting out who inherits what first isn't dodging the tax, it's just not creating a bigger transaction than you need.

Worth having the solicitor who's handling probate sanity-check the numbers before you complete the buyout though. A deed of variation has to be done within two years of the death, so getting it in writing from someone who does this every day definately beats working it out from forum posts (helpful as they are!)