PLEASE READ BEFORE POSTING
Hello Forumites! In order to help keep the Forum a useful, safe and friendly place for our users, discussions around non-MoneySaving matters are not permitted per the Forum rules. While we understand that mentioning house prices may sometimes be relevant to a user's specific MoneySaving situation, we ask that you please avoid veering into broad, general debates about the market, the economy and politics, as these can unfortunately lead to abusive or hateful behaviour. Threads that are found to have derailed into wider discussions may be removed. Users who repeatedly disregard this may have their Forum account banned. Please also avoid posting personally identifiable information, including links to your own online property listing which may reveal your address. Thank you for your understanding.Selling probate property
Eddysavingexpert
Posts: 1 Newbie
Hello,
My father passed away a few years back and myself/siblings (4 of us in total) inherited an unfinished property (not signed off by building control). My brother is the executor.
The property was estimated around £300,000 initially, with three individual evaluations of the property as required. Since then, with the estate still not having been administered, we have made major improvements to the property and got it signed off by building control. Its estimated value is now £600,000.
My questions are, with regards to legal and tax implications;
Should the house be sold under the estate or after administering?
If after administering is joint tenancy or tenants in common ownership preferable?
Two of us live at the property, one moved recently from the property and one has never lived there, who is liable for capital gain tax?
Note - other items in the estate are minimal and likely insignificant.
Not sure if this is the right place to ask but hopefully others may have had some experience in matters of this nature and may be able to help, apologies not. We have considered consulting an accountant but as this may be costly thought we would research first.
Many thanks in advance,
Eddy
My father passed away a few years back and myself/siblings (4 of us in total) inherited an unfinished property (not signed off by building control). My brother is the executor.
The property was estimated around £300,000 initially, with three individual evaluations of the property as required. Since then, with the estate still not having been administered, we have made major improvements to the property and got it signed off by building control. Its estimated value is now £600,000.
My questions are, with regards to legal and tax implications;
Should the house be sold under the estate or after administering?
If after administering is joint tenancy or tenants in common ownership preferable?
Two of us live at the property, one moved recently from the property and one has never lived there, who is liable for capital gain tax?
Note - other items in the estate are minimal and likely insignificant.
Not sure if this is the right place to ask but hopefully others may have had some experience in matters of this nature and may be able to help, apologies not. We have considered consulting an accountant but as this may be costly thought we would research first.
Many thanks in advance,
Eddy
0
Comments
-
Has your mother died (assuming married to father), maybe some years ago? Because her unused NRB would be passed to him + your father RNRB would make no capital gains tax payable on the estate.
Joint tenancy means you all own 25% so I assume that would be the way to go. Tenancy in common is when others have differing % interest in the property.0 -
Has your mother died (assuming married to father), maybe some years ago? Because her unused NRB would be passed to him + your father RNRB would make no capital gains tax payable on the estate.
There is a confusion here between inheritance tax and capital gains tax.0 -
My father passed away a few years back and myself/siblings (4 of us in total) inherited an unfinished property (not signed off by building control). My brother is the executor.The property was estimated around £300,000 initially, with three individual evaluations of the property as required. Since then, with the estate still not having been administered, we have made major improvements to the property and got it signed off by building control. Its estimated value is now £600,000.
Your father's will left his principal private residence to his four children?
Probate was granted but the executor has taken no steps to administer the estate?
The four children spent their own money on improving the property?
The property has always been the PPR of three of the children?
Some part of the gain is attributable to a general increase in house prices and some part to the improvements?
https://www.thegazette.co.uk/all-notices/content/100719
https://www.gov.uk/capital-gains-tax
Take professional advice.0 -
[FONT=Verdana, sans-serif]If the property is still owned by the estate then normally the estate is liable to CGT on its disposal on any gain over probate value less costs.[/FONT]
[FONT=Verdana, sans-serif]I think that would apply even though three of you have been living there as, at the moment, the house does not belong to you it belongs to the estate.[/FONT]
[FONT=Verdana, sans-serif]I don't think an estate has any PPR and only has one annual CGT allowance and even that only lasts to the 2nd year after death.[/FONT]
[FONT=Verdana, sans-serif]You need expert advice but it seems that the property should be transferred to the four of you before you sell. That way three of you will be able to claim PPR and the 4th will have their annual CGT allowance to offset any CGT bill.[/FONT]
[FONT=Verdana, sans-serif]You don't have to transfer the legal interest to the 4 of you which will involve land reg charges etc, you can just transfer the beneficial interest using a Assent of Equitable Interest.[/FONT]
[FONT=Verdana, sans-serif]Alternatively if you don't transfer the beneficial interest formally you could still claim, for tax purposes, that the beneficial interest is owned by the four of you, not the estate because:[/FONT]
[FONT=Verdana, sans-serif]'The administration period of the estate has ended because the residue of the estate has been determined'[/FONT]
[FONT=Verdana, sans-serif]There is more about that last option here:[/FONT]
[FONT=Verdana, sans-serif]https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg30940[/FONT]0 -
as above, at the moment it is the estate which is liable for CGT as the property remains in the name of the deceased and so their estate has to pay CGT.
Also as mentioned, there will by no CGT allowance available now to the estate after this long, and an estate does not get Private residence relief
the property needs to be sold by the beneficiaries, not by the estate
why has your brother failed in his task as administrator?
Can you "persuade" him to hand over to a professional and get things sorted? Unfortunately that could cost a lot of money in fees but at ;least it will be done correctly.0 -
The Estate (Executor) can sell the property, by providing the Probate Grant to the buyer and Land Registry.
The Estate would then be liable for CGT on the increase in value from 300K to 600K, - £300K
you can deduct selling costs (estate agent, legals etc) say £299K
I believe the Estate can also deduct an allowance [Trusts] of £5.850 = 293,150.
CGT is charged at 28% on this = £82,082
...................................................................
If the Estate is passed into the ownership of the 4 Beneficiaries, each will have a Capital Gain of 300K/4 = 75,000
2 of them (probably 3) can claim private residence relief so pay no CGT
The 4th can claim allowance of £11,700 = 63,300
CGT is charged at either 20% or 28% depending on income. If at 28%, the CGT woud be £17,724
..................................................
Please note I'm not a tax expert and I may have made errors in either the aths and/or the allowances etc!
But the important principle is that if the Beneficies sell, CGT can be reduced.
Note also you do not actually need to transfer the property into their names. A Deed can be drawn up for this purpose. See a solicitor, either specialising in conveyancing, or better, in wills trusts and probate!0 -
You cannot deduct selling costs nor the costs of any probate lawyer. The only deductible expense allowed is the funeral.
Inheritance tax is in fact yet another Orwellian term. The tax is not on what you inherit. It's on the value of the estate net of debts and funeral, which is more than you inherit, because there are further administration costs.0 -
westernpromise wrote: »You cannot deduct selling costs nor the costs of any probate lawyer. The only deductible expense allowed is the funeral.
Inheritance tax is in fact yet another Orwellian term. The tax is not on what you inherit. It's on the value of the estate net of debts and funeral, which is more than you inherit, because there are further administration costs.
That only applies to estate value at DOD,
Once in administration the costs start counting against different taxes.0 -
You need some expert help here to mitigate this potential mess when HMRC come after what they belief to be their share of that £300k.
Establishing when the beneficial interest transferred out of the estate could be crucial to mitigating CGT.
Advice should have been taken before anyone spent a penny on the property.0 -
you can deduct selling costs (estate agent, legals etc) say £299K
I believe the Estate can also deduct an allowance [Trusts] of £5.850 = 293,150.
[FONT=Verdana, sans-serif]An estate has a £11,700 annual allowance not the reduced trust allowance, but only in the tax year of death and the two following years. After that there is no annual allowance for an estate.[/FONT]
[FONT=Verdana, sans-serif]The estate can also set off the costs of obtaining probate, or a scale fee, in lieu of acquisition costs, against CGT, as well as disposal costs.[/FONT]0
This discussion has been closed.
Categories
- All Categories
- 343.2K Banking & Borrowing
- 250.1K Reduce Debt & Boost Income
- 449.7K Spending & Discounts
- 235.3K Work, Benefits & Business
- 608K Mortgages, Homes & Bills
- 173.1K Life & Family
- 247.9K Travel & Transport
- 1.5M Hobbies & Leisure
- 15.9K Discuss & Feedback
- 15.1K Coronavirus Support Boards