Inheritance question (bought out of inherited property)

[NewNameNeeded]

Hi,

Asking this question on behalf of a friend. Hoping you may be able to assist or at least provide some food for thought before approaching a solicitor.

My friend's nan passed away a little while ago.

The estate (just a house - no other assets) is split three ways. One individual (the executor of the Will) wants to buy the other two out of their share of the property so that they can live there. They've agreed a valuation of £300k, which is fair market value for the property.

If my friend agrees to be bought out and receives £100k for their share of the inherited property would that still be considered as inheritance from a tax perspective, or given they are selling their share of the inheritance and receiving money for it would this sum be taxed as if income?

Is there a specific way the individuals need to be bought out in order for this money to be considered as inheritance, and hence not be subject to tax?

Thanks in advance oh wise PHers!

[nitrodave]

the IHT tax threshold is £325k and this falls below that, so your friend will get £100k with no tax to pay.

[Sheepshanks]

NewNameNeeded said:

If my friend agrees to be bought out and receives £100k for their share of the inherited property would that still be considered as inheritance from a tax perspective, or given they are selling their share of the inheritance and receiving money for it would this sum be taxed as if income?

It's not income and, as pointed out already, it's below the IHT threshold.

You might want to take proper advice on this, especially if the person buying the house needs a mortgage.

How long ago did his Nan die? I'm not an expert but have kept an eye on this as we have a quarter share in a house I'd be interested in acquiring and apparently the proper way of doing this is the person who wants it buys it off the estate and then the estate pays the others.

If she died a while ago and ownership has already been transferred then there could be a CGT liability but unlikely to have changed value much in a short time unless the house was undervalued for probate. And there's an exemption for the first £11K.

[NewNameNeeded]

Thanks for the replies. So it would seem whether he inherits 1/3rd of the property or the estate buys him out he's covered by IHT. Thanks.

[quote=Sheepshanks]... apparently the proper way of doing this is the person who wants it buys it off the estate and then the estate pays the others.
quote] Yes, I believe this is the approach they are going, though I don't know if the chap buying them out is a cash buyer or needs a mortgage, or needs to sell a property to purchase.