Best option for selling decease's house

[Atlas 12v]

Hopefully this the correct part of the forum for this, apologies if not.

My parents bought my Grandparents house for them in 1983, paid £14,250 now worth approx £350k, and put the house in my Grandparents names (title deed). To allow them to live securely for the rest of their lives without the worry of rent etc.

At the time a "declaration of trust" was written to show the house was paid for by my parents for my Grandparents to live in until they passed away. My Grandmother passed away in Dec 20 thus the house is now empty and to be sold.

Question is, as the property is in my Grandparents name in theory my parents would inherit it? Will the "dec of trust" affect this?

What is the best way to dispose of the house to avoid tax, be it inheritance or capital gains?

Thanks in advance.

[deckster]

IANAL.

A lot will depend on exactly what the declaration of trust says and in your shoes I might be looking to take professional advice on this as potentially 10s of thousands in tax is at stake.

However in simple terms and without knowing anything more:

• If the house is legally owned by your grandparents, then it will form part of the estate and will potentially be subject to inheritance tax
• If the house is legally owned by your parents, then they will have to pay CGT on the uplift in value of the house.

Unless your grandparents have other significant assets, then the second outcome is likely to incur a much higher tax bill than the first and hopefully the declaration of trust will have been made with this in mind. But it does all hinge on what that says.

[Atlas 12v]

Thanks for the response. The two outcomes are the ones we expected and as you say the later will be the worse case for tax.

The house is the only asset that would be inherited, all other monies were used to fund care in the last years of my Grandmothers life, so as is my understanding if sold at £350k would not attract inheritance tax?

[Armitage.Shanks]

Good question this. I did similar with my wife's parents buying their house but kept it in my name. It did raise questions when the assessment for care home fees was made but I've owned the house in excess of 11yrs so the 'deprivation of assets' was a non-starter.

I expect to be liable to CGT when and if I decide to sell it when it's no longer occupied. Didn't consider a 'trust' at the time but I'm not sure that would change who owns it for tax purposes?

[Atlas 12v]

As I understand it if the title deed is in your name (or my parents) then CGT would be payable.

However in my parents case they put the property in my GP name for security for my GP at the time more so than the potential foresight of avoiding CGT.

[Sheepshanks]

Atlas 12v said:

The house is the only asset that would be inherited, all other monies were used to fund care in the last years of my Grandmothers life, so as is my understanding if sold at £350k would not attract inheritance tax?

Did the local authority by any chance pick up any of the care cost on the basis that grandmother didn't own the house, so its value couldn't be taken into account?

[Atlas 12v]

No, pension covered the costs and my parents topped up where required. Care was private no LA.

[Sheepshanks]

Atlas 12v said:

As I understand it if the title deed is in your name (or my parents) then CGT would be payable.

However in my parents case they put the property in my GP name for security for my GP at the time more so than the potential foresight of avoiding CGT.

Was the declaration of trust lodged with the Land Registry? I think that's the point of them - to stop the beneficiaries from flogging the house and doing a runner with the proceeds.

So it should get picked up during the sale. Although in selling late FILs place recently, both parties using 'proper' solicitors, neither noticed until several months later that there was a charge registered againt the property. I'm not sure what brought it to light, but seems the system works, although it would have been too late if the charge hadn't already been settled.