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Where Taxpayers and Advisers Meet

tax implications on sale of grandmothers house

Joined:Thu Sep 23, 2021 5:52 pm
tax implications on sale of grandmothers house

Postby matchless » Thu Sep 23, 2021 6:25 pm

My grandmother died in January 1982. My mother, now almost 89, is the eldest of her three children. She had a sister and a brother, my aunt and uncle.

At the time of my grandmother's death my aunt was unmarried and still living at home. My mother and my uncle were no longer living at home.

My grandmother left the house in trust with the two partners in a local firm of solicitors for my aunt to live in while she remained single, and then eventually to be sold and the proceeds to be divided equally between my mother, my aunt and my uncle.

The three siblings never legally owned the house. In January 1982 the house was valued at £22,500.

My uncle very quickly put pressure on my aunt to buy out his 1/3 interest in the house and give him the value. She did so over a period of a couple of years and he received £7500.

A variation of the Deed of Trust was prepared by the solicitors so that on the eventual sale of the house my aunt would receive two thirds of the proceeds and my mother one third.

My aunt never married and continued to live in the house until shortly before her death in May this year, aged 84.

The house is now valued at £500,000, so after legal and other expenses, my mother's share will be say around £160,000, with around £320,000 due to my aunt's estate.

Is there a potential liability for Capital Gains Tax for my mother and or my aunt's estate from the increase in value of the house over the last 39 years?

My mother was prevented from receiving her inheritance any sooner, by the terms of my grandmother's will, and while the house was my aunt's principal residence, she never owned it. Neither of them was ever the legal owner of the house.

My aunt also has cash assets approaching £100,000, taking the value of her estate to over £400,000. How much exemption from inheritance tax can we claim? The government website states

"If you own your home (or a share in it) your tax free threshold can increase to £500,000 if:
you leave it to your children....or grandchildren (not applicable in this case)
your estate is worth less than £2 million"
Are these conditions "and" or "or"? It is not clear, but my aunt was not the legal owner of the house......

Joined:Thu Sep 23, 2021 5:52 pm

Re: tax implications on sale of grandmothers house

Postby matchless » Mon Sep 27, 2021 9:10 am

Have I posted this in the wrong section?

Joined:Sat Feb 01, 2014 3:26 pm

Re: tax implications on sale of grandmothers house

Postby bd6759 » Mon Sep 27, 2021 4:27 pm

If the house was held in trust, the trustees will be liable to CGT.

However, residence relief can apply to trustees if the property was occupied as the main residence of a beneficiary (your Aunt). So the gain is likely to be exempt from CGT.

Your Aunt’s IHT is likely to be based on the whole value of the house.

Return to “Capital Gains Tax, CGT”