CGT on inherited property - sale 3months after probate

by **tippers** on Thu Apr 30, 2009 8:27 pm

Hi,

My grandfather died in February this year, and his 5 children are currently in the process of selling the property. It is legally owned by only one - my Uncle, who is sole executor.
The house was valued for probate at £200,000, being the mid-value of three estimates from estate agents in the area. It went up for sale 3 weeks ago at what was thought to be an optimistic estimate of £220,000, but intense competition has led to an offer being accepted of just over £240,000 today.
Is there any way that CGT on the excess of £40,000 can be avoided? My uncle is married, so is there a possibility of putting the property in his wife's name too in order to get two annual exemptions? Or could the probate value perhaps be changed to the offer value given that the sale will take place so close to the date of death? I believe that probate is now fully complete, will this make a difference?
Of course the CGT payable will be split between all 5 siblings and so won't amount to a great deal each, but if anything can be done to reduce the amount of tax payable that would be fantastic.

Many thanks.

by **AvocadoK** on Thu Apr 30, 2009 8:53 pm

Was the house the main asset in the estate? If so, the value was low enough that the estate will be an 'excepted estate' so it will not have needed to be formally "determined" for IHT purposes. You will then be free to use whatever you think the real market value of the house was back in Feb - as you say, this is likely to be little different from today's offer.

(If there were other assets in the estate so that IHT is chargeable, increasing the value of the house will increase IHT at 40% and save CGT at 18%, so you wouldn't do that!)

by **pawncob** on Thu Apr 30, 2009 8:54 pm

Surely, your uncle holds the property as executor, so he can't put it in joint names.
As the death was so recent, there is a case for increasing the probate valuation, unless of course this incurs IHT on the estate (40% rather than 18%).
The CGT will be borne by the estate, not the beneficiaries, although of course they will ultimately receive less as a result.

by **tippers** on Fri May 01, 2009 11:14 am

If the IHT threshold is now £325,000, then I don't think IHT will be payable even with the increase in value. Therefore our best bet is to try and get probate value changed to the selling price.
Thanks so much for all your help, it's much appreciated.

by **Peter D** on Fri May 01, 2009 12:53 pm

No the IHT was £312,000 at the DOV. You can apply to the Probate office ( with the 12 months window ) to place the actual figure into the probate report so there can be no question of CGT on the increase. Regards Peter

by **Peter D** on Fri May 01, 2009 12:55 pm

I assume there was no IHT issue on the estate. Regards Peter

by **maths** on Fri May 01, 2009 9:08 pm

Unless the proper "paperwork" is in place it seems highly likely that the sale is being effected by the executor and not by the beneficiaries.

If so, there will not be 5 CGT annual exemptions as is suggested but one.

by **Peter D** on Sat May 02, 2009 8:25 am

If you do not address the probate value, as I recommended, then Maths comment is very important, you assumption of "Of course the CGT payable will be split between all 5 siblings and so won't amount to a great deal each, but if anything can be done to reduce the amount of tax payable that would be fantastic." would take a legal professional to resolve this correctly. There was a case recently where the executor had signed exchange of contracts without regard for the beneficaries legal entitlement to the ownership of the property and fell foul of CGT as he could not use the beneficaries allowances. Regards Peter

by **Lee Young** on Sat May 02, 2009 10:42 pm

If CGT is a concern then what should have happened is that the executor appropriate the property to the beneficiaries at the "probate" value and the sale is effected by the five beneficiairies using up to 10 annual exemptions (if each is married). Hindsight is a wonderful thing - with the assistance of a suitably qualified solicitor or accountant advising on the estate this truck iould not have been missed.

However the CGT base value of the property will only have been fixed if there is IHT payable on the estate and the Revenue has accepted the figure you have submitted. If not, you are free to adopt the sale value of the property as the true market value of it at the date of the death and therefore no CGT will arise.

Therefore,, is IHT payable on the estate?