CGT on parents property

[adey1973]

I was hoping that someone could help with some CGT related questions on some property jointly owned by my elderly parents who are divorced.

My parents bought a house in 1960s for 5k. They were married at the time and this house was the family home. My mom still lives in the house but I believe the house is jointly owned, as this was part of the settlement when my parents divorced in the early 80s. The property is now worth about 220k.

My dad also bought a cottage in wales in the 70s, for 5500. Half of this property was given to my mom again as part of the divorce settlement. The cottage is worth about 80k now and has had very little spent on it over the years. Its used as a holiday home by the family and friends, mainly my brother and I. There is no rental income from the cottage and never has been.

My parents would like to know that in the event of one of them dying, if the house is sold, will CGT need to be paid and how much? There have been a number of improvements made to the property as you can imagine over the last 50 years.

I'm hoping the cottage will never be sold ideally I would like to inherit it. Is there anything we need to bear in mind regarding CGT with the cottage or would this be only due if/when the property was sold?

In the event of my dads death, where does my mom stand in terms of the house she is living in that she jointly owns with him? My dad has his own house which he owns outright. In the event of my dads death he is planning to leave his half of the house to my mom.

I've told my folks that I'm not interested in the content of their wills, but would like them to go and see a solicitor to make sure both of their wills are sorted and minimise having to pay tax in the event of either one of their deaths. They dont seem keen on this and want me to look into a diy will using the internet as they are cautious about cost and my mom cant stand the family solicitor.

I'd prefer they seek proper legal and financial advice, whos best? a solicitor of financial advisor or is this something I can do with the help of my brother?

We've done a quick calculation in terms of inheritance tax but we dont think this will be an issue in the event of either parents death, although dads assests are approaching the 325k threshold.

Any guidance would be greatly appreciated. Thank you.

[mullet]

Without wishing to be insensitive, death is a very effective way of legitimitely avoiding CGT. Death typically triggers a disposal of assets, but death is not treated as a chargeable occasion for CGT purposes.

Assets within the estate are uplifted to market value at date of death and pass to the legatees at that value. So if assets are sold soon after death/inheritance, any gain will often be covered by the annual exemption (if not otherwise used) or else will produce a modest CGT liability. Obviously that is a generalisation and doesn't take account of specific circumstances, but it holds good in many situations. And if assets are retained by the legatees, their base cost is market value at date of death rather than original cost or March 1982 value.