Liability of Property Passed to Dad From His Sister's Estate

by **TCA** on Tue Nov 29, 2011 5:06 pm

Hi

Not sure if this is posted in the correct section but here goes. My Dad has been named executor of his sister's estate upon her death and is also set to inherit her home. Should my Dad pre-decease my Aunt then the property falls to my Mum (on my Aunt's death) and should my both my parents die before my Aunt, then the ownership of her home would pass jointly to my sister and I on her death.

The property would only be valued at around £150,000 so just wondering if there would be any tax liability along the way in any of the above circumstances? My parents currently own and live in their own home, so this could be a second property for them. My sister and I both rent properties however.

Thanks for any guidance.

TCA

by **pawncob** on Tue Nov 29, 2011 11:56 pm

That depends on the total value of your aunt's estate. If it's over £325k, or includes gifts made within seven years which take it over that value, there will be Inheritance Tax to pay. the tax is due from the estate regardless of who inherits the property.

by **TCA** on Wed Nov 30, 2011 10:30 am

Thanks pawncob. To my knowledge, the property will be the only major asset of her estate, so I was assuming it will total less than the £325k limit. I was more concerned about any potential tax issues for my parents for inheriting a second home and potentially disposing of it.

For example, would they be liable to capital gains tax if selling the willed property? Would the fact that they already have their primary residence be a factor from any perspective?

by **pawncob** on Wed Nov 30, 2011 10:51 am

Yes they'll be liable to CGT on any disposal, but if it's sold soon after probate, there'll be no increase in value. If it's intended to keep the property for many years, best put it in joint names to save CGT.

by **TCA** on Wed Nov 30, 2011 11:12 am

Many thanks again pawncob. So just to clarify my understanding, any CGT would be based on the increase in value from probate until sale date?

What would be the start date for CGT purposes, if my either of my parents fell heir to the property, then transferred the ownership to me or my sister prior to their death? i.e. if we're assuming ever increasing house prices and my parents never intend to live in the willed property but want to gift it to us children, would they be better doing it when they take ownership or just leaving it in their own wills?

i.e. is it a case of my parents would avoid CGT by transferring ownership quickly to their children or would this just be the same as leaving in their wills, with the only potential tax being due if they passed on the gift before they died and prices had gone up?

by **pawncob** on Wed Nov 30, 2011 12:39 pm

The best way is to get your aunt to change her will in your favour.
Alternatively, wait until probate is granted and then vary the will in your favour.

by **TCA** on Wed Nov 30, 2011 1:21 pm

pawncob wrote:The best way is to get your aunt to change her will in your favour.
Alternatively, wait until probate is granted and then vary the will in your favour.

Cheers. So without altering my aunt's will, my Dad as executor could decide to will the property to his children if he so wished at the time of probate? Out of interest, could someone request to have their inheritance/ownership of assets transferred to anyone at probate?

by **pawncob** on Wed Nov 30, 2011 4:48 pm

ALL benficiaries have to agree with the variance.

by **maths** on Wed Nov 30, 2011 5:19 pm

Pawncob is referring to what is called a "Deed of Variation".

A DoV allows someone who inherits under a will to re-direct their inheritance to anyone else who they choose without giving rise to any IHT or CGT consequences on their part. The DoV only needs to be signed by those who are effected; not all beneficiaries thus need to sign.

So, your father if he were to inherit a property under a will could simply execute a DoV in say your favour and you would then inherit it.

The DoV need only be executed within 2 years of death.

by **TCA** on Wed Nov 30, 2011 6:08 pm

Thanks. This is very informative indeed.

Searching a bit on Deeds of Variation brought to light another issue which I hadn't considered and may be of importance. Namely the situation whereby (God forbid), both my parents require to pay for their own care home fees and they could be sitting with potentially not one but two properties, which could require selling to pay for this.

I would hope that my mum and dad can live out their days in their own home and I know they'd be devastated if they had to sell instead of pass it on to me and my sister (as it's their only asset) but that would be made even worse if my aunt's house ended up in the same situation.

Would a Deed of Variation on my aunt's will be considered "deprivation of assets" if my parents were in care and had already sold their existing property to pay for it or were living in care being paid for by the government?