CGT on death of one of joint holders of portfolio

[sigmund]

My wife and I have a portfolio of unit trusts and OIECs held in our joint names. These are growth funds that we use to realise our tax free CGT allowances each year. If one of us were to die, as the portfolio is held in joint names, it would automatically pass to the survivor.

My question is, if at that stage half of the total portfolio were to be realised by the survivor, would that half be exempt from CGT as I understand that no CGT is normally payable at death?

[King_Maker]

No, not exempt from CGT.

But as there is likely to be little/no gain, no CGT should be payable.

[sigmund]

Thank you King_Maker. I obviously used the wrong term when I said 'exempt'. What I meant was would the capital gain be calculated from the value of that half of the funds realised at the time of the death or from the value when the funds were first purchased.

[King_Maker]

It might be a mixture of Trustee and Beneficiary sales might minimise any CGT due.

You would need to crunch the numbers.

[maths]

The value of the 50% inherited would be market value at the date of death.

Assuming the investments are held as joint tenants (not tenants in common) as is likely then sales by the trustee/executor as mentioned by King-Maker cannot occur.

Often on death the issue arises as to whether subsequent sales should be effected by the executors or the inheriting beneficiaries under the will. However, with assets which pass by
survivorship (i.e. those held as joint tenants) the executors are not involved.

[sigmund]

Thank you both for your replies. This is getting complicated. Basically the situation would be that on my death the joint holdings of funds that I held with my wife would automatically be owned by my wife. If she then wanted to sell half of them (i.e. my share), would any capital gains calculation be based on what was originally paid for the funds or would the capital gains for that half (i.e. my share) be based on the market value of that half as at my death? I hope that this adds some clarification

[King_Maker]

Assuming a joint tenancy, you will inherit your wife's 50% share of the portfolio at its value on the date of her death.

[maths]

Example

You and wife own jointly 100 shares.

They were purchased for £100.

You die when shares are worth £3 each.

Your wife originally effectively owned 50 shares at a cost of £50.
She inherits your 50 shares worth £150 at your death.

Wife now owns 100 shares with a cost of £50 + £150 = £200 (i.e. £2 each).

Wife sells 50 shares for £300.
Cost of the 50 shares is £2 x 50 = £100.

Gain £200.

In short after your death a pool of shares is created and they cannot be separated out on a sale.

[sigmund]

Thank you very much for the illustrations.