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Where Taxpayers and Advisers Meet

Selling Half Share of Inherited Property to Family Member

jsilva
Posts: 3
Joined: Tue Jan 21, 2020 12:53 pm

Selling Half Share of Inherited Property to Family Member

Postby jsilva » Tue Jan 21, 2020 1:17 pm

Hi

Looking for advise on what happens if I were to sell my half of a property that was Inherited after my mother died in 2019. Probate has been granted on the estate and the IHT has been paid on all the assets however as the house was owned Tenants in Common the other half of the property is still owned by the spouse.

The family members have offered to purchase my share of the house and just trying to work out what the IHT and tax there would be if I were to to sell my share now and not wait for the house to be sold when the other party dies.

For an example lets say the property is worth £900k. I believe there will be a RNRB of £175k (tax year 20/21) that can be used to offset against the tax for our half (as we have used the £325k to offset IHT for probate). In my simple world therefore, I believe there is IHT due on £900k divided by 2 (as I only own half the property) less the £175k offset. So £450k - £175k = £275k of IHT to pay at 40%. Therefore i believe there is £110k of IHT to pay. Am I correct so far?

Assuming I am correct and the family want to purchase my half, they have offered to give me a lump sum of £450k-£110k = £340k. So my question is:

1. Do I have to pay the IHT at the point of sale or is that for them to sort out when the spouse dies
2. Do I have to pay any other tax on the money as the property is valued at the same as probate

What would be my tax implication if I didn't sell and just waited. Yes I know the property can go up or down so things will change and obviously the RNRB and IHT threshold will change in the coming year.

Thanks for any and all advise.

maths
Posts: 7895
Joined: Wed Aug 06, 2008 3:25 pm

Re: Selling Half Share of Inherited Property to Family Member

Postby maths » Tue Jan 21, 2020 4:58 pm

I think there may be some confusion.

In 2019 when you inherited a 50% property share you would. generally speaking have no IHT to pay; IHT on the deceased's estate comes out of their estate not your 50%.

IHT is therefore irrelevant.

On a sale by you of your 50% you would be exposed to a CGT not IHT charge on any gain; the gain is the difference between the value of your 50% in 2019 on death and what you sell it for.

jsilva
Posts: 3
Joined: Tue Jan 21, 2020 12:53 pm

Re: Selling Half Share of Inherited Property to Family Member

Postby jsilva » Tue Jan 21, 2020 5:22 pm

Thanks for the reply.

Just to clarify. IHT was paid on the deceased's estate as it went over the £325k threshold. The property was held Tenants in common by my late mother and her husband. My mothers share was left to me with a life interest trust for her husband to live in until he dies or sellls the property. He wants to buy my share. There is no gain on the property since probate was granted. So if I sell my half share no to him, what tax if any am I liable to?

If we didn's sell our share now what is the tax implication for me when the husband dies

maths
Posts: 7895
Joined: Wed Aug 06, 2008 3:25 pm

Re: Selling Half Share of Inherited Property to Family Member

Postby maths » Wed Jan 22, 2020 5:21 pm

No mention was made in your original post re a life interest for father?

The sale by you of your remainder interest to father will not attract a CGT charge on your part. However, as the trust will then terminate Father will be treated as having disposed of his newly acquired interest in return for the trust assets and hence may have a CGT charge; in addition, the trustees will also have a potential CGT charge.

If the remainder interest falls in on the death of father the trustees will be deemed to have sold the trust asset and reacquired it then holding the asset as bare trustees for you. No actual CGT charge will arise on the part of there trustees (because of father's death) and you will acquire the trust asset at its then market value.

jsilva
Posts: 3
Joined: Tue Jan 21, 2020 12:53 pm

Re: Selling Half Share of Inherited Property to Family Member

Postby jsilva » Thu Jan 23, 2020 12:43 pm

Thank you for your response this helpful at gives me something to think about


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