Inheritance Question / CGT Concern

[V41LEY]

My share of my mother’s estate is now about to be paid to me.
This is originally from the sale of a rental flat owned by my mother but later
transferred to my sister as my mother became too old to manage tenants etc.
This was 10 years ago and my sister and I had an understanding that when my mother passed
and the flat was sold I would get half of the sale proceeds.
Move on to 2019 and I discover that my sister had sold the flat and invested all the money in a
business she and her husband were buying. Business still viable and solvent to my knowledge.
Sister and husband are now divorcing and have sold their family home in the usual divorce carve-up and my share of my mother’s estate is coming out of equity from the house sale.
Sum in question is well below the IHT threshold.
My question is can I just accept a bank transfer from my sister or would this be viewed as a CG instead of inheritance ? If it is a CG - what are the options open to me ? Thx

[Cheib]

Is all this documented in your mother’s will ? Was the property formerly gifted to your sister ? She may have a CGT liability depending on the value when gifted and when sold. If the flat was gifted and title transferred 10 years ago I don’t think the flat is part of your mother’s estate (7yr limit on gifts). Although I suspect there are rules about gifting assets and then still enjoying the the benefit of them i.e. rental income.

I have no clue what the formal tax position would be I am afraid and I suspect you really need professional advice from someone who can see the relevant documentation

[ATG]

Being given stuff does not generate a tax liability, i.e. if you inherit stuff from your mother or receive a gift from your sister, you aren't going to need to pay any tax. IHT would be paid by your mother's estate (were it sufficiently large) before assets were distributed to the beneficiaries. Your sister might have a CGT liability when she sells assets that she owns or when she gives them to other people.

[OzzyR1]

As above, is any of this documented in your late mother's will?

As it's not come up between you and your sister in the last 10 years, hope you can sort it out amicably.

[anonymous-user]

Unless things have been differently documented somewhere in the past then what's happening here is straightforward; your sister will be making a substantial gift to you. That gift will be a PET for IHT purposes and whether any tax becomes payable by you will depend upon whether,

• Your sister dies within 7 years, and
• Whether her estate incurs any IHT liability.

Unless she has previously made other substantial gifts it's very unlikely you would have any tax to pay.

[Mr Pointy]

I trust you're getting 10 years compound interest on the loan you gave her.

[Welshbeef]

Mr Pointy said:

I trust you're getting 10 years compound interest on the loan you gave her.

Isn’t he getting 50% of the sale proceeds so up or down he has the equal position.

Re rental income we have to assume that was paid to his mum and I’d assume a reasonable “fee” for his sister managing the house was taken away from that value which is fair.

[V41LEY]

rockin said:

Unless things have been differently documented somewhere in the past then what's happening here is straightforward; your sister will be making a substantial gift to you. That gift will be a PET for IHT purposes and whether any tax becomes payable by you will depend upon whether,

• Your sister dies within 7 years, and
• Whether her estate incurs any IHT liability.

Unless she has previously made other substantial gifts it's very unlikely you would have any tax to pay.

Thx.

[JulianPH]

V41LEY said:

rockin said:

Unless things have been differently documented somewhere in the past then what's happening here is straightforward; your sister will be making a substantial gift to you. That gift will be a PET for IHT purposes and whether any tax becomes payable by you will depend upon whether,

• Your sister dies within 7 years, and
• Whether her estate incurs any IHT liability.

Unless she has previously made other substantial gifts it's very unlikely you would have any tax to pay.

Thx.

Steve (rockin) is bang on with this and you will certainly have no CGT to pay (as you never owned the asset).

Inheritance tax is a dirrerent matter, but pretty straight forward (though quite complex sometimes). Give me a PM if you would like to know more, but it is summed up very well above.

[Mr Whippy]

Just to check.

Has your mother actually passed away?

It’s not mentioned explicitly and I’d assume if she had then your executor would have dealt with all this for you?


Assuming not then there must be no IHT.

Only CGT/gift IHT exposures, and an agreement between your mum and her children who pays if/when those gifts become exposed to IHT.

I’d assume this is just a pure gift from sister at this stage... and her estate would default cover IHT exposure if she passed on.

She’ll have covered any CGT concerns in the meantime unless agreed otherwise.

Is there any kind of agreement in writing between mum/sister/op?

Edited by Mr Whippy on Wednesday 30th December 09:58

[Cheib]

The question I asked in my post is relevant and has implications for the status of the flat as a gift to your sister 10 years ago.. Did your mother still benefit from the flat ? I.e. receive the rent ? If she did that potentially has implications for IHT/CGT.