Inherited Property - 3 Beneficiaries - Need to rent it out ?
Discussion
I think you'll get hit with a tax bill.
IIRC when I bought a probate house the tax man actually demanded the two brothers stumped up the cash before exchange.
I think this was triggered when they changed the title into their names.
I presume the tax bill was CGT based on the gain from the 60's when their parents had bought to when I bought it in 2007.
I remember this cuasing a delay as one or both of them had to borrow the money to pay the tax bill in order to get the sale process under way again.
IIRC when I bought a probate house the tax man actually demanded the two brothers stumped up the cash before exchange.
I think this was triggered when they changed the title into their names.
I presume the tax bill was CGT based on the gain from the 60's when their parents had bought to when I bought it in 2007.
I remember this cuasing a delay as one or both of them had to borrow the money to pay the tax bill in order to get the sale process under way again.
Edited by AC43 on Sunday 26th April 11:55
[quote=AC43]I think you'll get hit with a tax bill.
IIRC when I bought a probate house the taxman actually demanded the two brothers stumped up the cash before exchange.
I think this was triggered when they changed the title into their names. Neither of them lived in at that point so it wasn't classed as their primary residence.
I presume the tax bill was CGT based on the gain from the 60's when their parents had bought to when they put it on the market in 2007.
I remember this causing a delay as one or both of them had to borrow the money to pay the tax bill in order to get the sale process underway again.
IIRC when I bought a probate house the taxman actually demanded the two brothers stumped up the cash before exchange.
I think this was triggered when they changed the title into their names. Neither of them lived in at that point so it wasn't classed as their primary residence.
I presume the tax bill was CGT based on the gain from the 60's when their parents had bought to when they put it on the market in 2007.
I remember this causing a delay as one or both of them had to borrow the money to pay the tax bill in order to get the sale process underway again.
AC43]C43 said:
I think you'll get hit with a tax bill.
IIRC when I bought a probate house the taxman actually demanded the two brothers stumped up the cash before exchange.
I think this was triggered when they changed the title into their names. Neither of them lived in at that point so it wasn't classed as their primary residence.
I presume the tax bill was CGT based on the gain from the 60's when their parents had bought to when they put it on the market in 2007.
I remember this causing a delay as one or both of them had to borrow the money to pay the tax bill in order to get the sale process underway again.
Any IHT is linked only to the value of the estate and is not connected to capital gains (or CGT).IIRC when I bought a probate house the taxman actually demanded the two brothers stumped up the cash before exchange.
I think this was triggered when they changed the title into their names. Neither of them lived in at that point so it wasn't classed as their primary residence.
I presume the tax bill was CGT based on the gain from the 60's when their parents had bought to when they put it on the market in 2007.
I remember this causing a delay as one or both of them had to borrow the money to pay the tax bill in order to get the sale process underway again.
Jasey mate - Surlely the solar pannel lease agreement became void when your Mum passed away as there are no surviving parties to this contract?
Send me a copy if you want me to go over it (I studied contract law and my wife was a lawyer), as if is the case you can just inform them of this, all payments stop and they can come and collect.
It might also be worth you having a chat with Nik over the other issues.
Jasey_ said:
Hi Eric,
The deeds are currently in my mother name.
The signing over of the deeds is to me and my 2 siblings so we become the new owners.
So, you don't have to transfer anything. The property automatically goes to the three beneficiaries once probate has been granted.The deeds are currently in my mother name.
The signing over of the deeds is to me and my 2 siblings so we become the new owners.
Therefore, if it is rented out, the rental profits will be split three ways and each individual will have to return their share of the rental profits each year on their own personal self assessment tax returns.
If, at a later date the property is sold, and there is a capital gain on the sale (not always guaranteed), the gain is split between the three owners who will have to return their share of the gain to HMRC. One big change that occurred on 6 April is that Capital Gains and Capital Gains Tax on the disposal of residential properties is no longer part of the annual Self Assessment tax system. Instead, the individual who makes a gain has to notify HMRC and pay the Capital Gains Tax arising within 30 DAYS OF THE DATE OF THE DISPOSAL. This is new and I haven't had to handle any such transactions yet.
Jasey_ said:
Hey Julian,
The lease panels are owned by the company and they are provided FOC to my folks - in return they signed a 25 year "lease" that allows the company to keep the panels on the roof in return for free electricity during the day.
I tried to warn my Dad not to sign up for the pishy solar panels but he liked a "bargain".
I can easily fwd you the documents if you want a read but I think the lease is OK - The sale fell through because the buyers solicitor wanted to amend the lease as they didn't like one of the clauses but the lease company said no.
If you're bored will give you something to get the inner lawyer going
Hi mateThe lease panels are owned by the company and they are provided FOC to my folks - in return they signed a 25 year "lease" that allows the company to keep the panels on the roof in return for free electricity during the day.
I tried to warn my Dad not to sign up for the pishy solar panels but he liked a "bargain".
I can easily fwd you the documents if you want a read but I think the lease is OK - The sale fell through because the buyers solicitor wanted to amend the lease as they didn't like one of the clauses but the lease company said no.
If you're bored will give you something to get the inner lawyer going
The lease should still expire when your parents passed away as it would be highly unusual (and any clause within the contract probably not enforceable) to tie another party into the agreement.
The buyer's solicitor should have discovered if the contract was now void, but this wouldn't be the first time I have seen such a thing missed and I assume they he/she is a conveyancing solicitor, not a contact lawyer.
I've got little to do this afternoon so feel free to send a copy over and I'll go through it and see what I can find.
Cheers
Aside the the solar panels I have done this
Mum died leaving the (actually 3) but that’s irrelevant) house jointly to my brother and I. On completion of probate we transferred ownership to me, brother and our respective wives. The thinking being that during the time we rent out tax is split 4 ways and any CGT on eventual sale would again be split 4 ways.
It was agreed that I would manage the property and divi out the profits. For whatever reason my sister in Law stopped speaking to my wife and I but we remain on very good terms with my brother.
Along the way 2 properties were sold and CGT paid. No problem with tax. All properly declared stating joint ownership etc.
Then my brother is diagnosed at 60 with MND and so after long discussions my wife and I agreed to buy them out. Given the likely problems in the future we are pleased to see any legal relationship with SIL be removed.
Transfer was done but we had to pay stamp duty on the whole value of the property.
Brother is doing OK and we remain on very good terms. SIL never mentioned by either .... strange situation but it works
Mum died leaving the (actually 3) but that’s irrelevant) house jointly to my brother and I. On completion of probate we transferred ownership to me, brother and our respective wives. The thinking being that during the time we rent out tax is split 4 ways and any CGT on eventual sale would again be split 4 ways.
It was agreed that I would manage the property and divi out the profits. For whatever reason my sister in Law stopped speaking to my wife and I but we remain on very good terms with my brother.
Along the way 2 properties were sold and CGT paid. No problem with tax. All properly declared stating joint ownership etc.
Then my brother is diagnosed at 60 with MND and so after long discussions my wife and I agreed to buy them out. Given the likely problems in the future we are pleased to see any legal relationship with SIL be removed.
Transfer was done but we had to pay stamp duty on the whole value of the property.
Brother is doing OK and we remain on very good terms. SIL never mentioned by either .... strange situation but it works
We had a similar situation when we were buying a house where the owner had signed a lease deal on a building which was part of the property. The mortgage company didn’t like the smell of it.
The owner of the property was in a care home and had given power of attorney to someone else so the status of the lease was not clear.
I don’t remember all of the details but I think our solicitors used the argument that Julian is putting forward that as one party was out of the picture they had to relinquish the lease. They begrudgingly were willing to.
The sale then fell through because of a tree causing damage so we wrote it off for a bad one.
The owner of the property was in a care home and had given power of attorney to someone else so the status of the lease was not clear.
I don’t remember all of the details but I think our solicitors used the argument that Julian is putting forward that as one party was out of the picture they had to relinquish the lease. They begrudgingly were willing to.
The sale then fell through because of a tree causing damage so we wrote it off for a bad one.
OP... a few thoughts/comments having handled probate for my father and before and also as a (small time!) landlord...
- do you actually want to rent the property out, with all the hassle this can entail? How will this property be advertised, let & managed - by yourselves (i.e. the 3 of you, equally putting the effort it) or will you (at a cost) have it managed?
- how long do you think you might plan to rent it for?
- are you ready for the various legislative aspects of becoming a landlord?
- how good a relationship do the 3 of you have and will it stand up to the additional complexity?
- when the boiler goes pop, or similar unexpected expense will everyone pay their share or will it lead to problems?
- what sort of condition is the property in... I've let two places I've previously lived in, with both problems came thick and fast.. things that had always been on my "to do" list as a live-in owner.
- post up some numbers of what the property might be worth, what it might rent for etc and people here can help guide you what level of income it could generate.
- IANAL but I'd echo was has been said wrt the solar panel "contract"; but (and apologies if I've missed it) I take it your father has also passed away?
- unless you have pressing financial circumstances then you don't need to rush, and given the current situation, you can't rush anyway. If you do need to rush, perhaps renting isn't for you, it's a long term thing really.
- tax wise, the profit (i.e. your share of rental income less allowable expenses) will be taxed as part of your income. No need to do anything clever here and the costs of doing so probably outweigh the potential benefit for one property.
- if one of you were to die, the share would be passed on as per your wishes as part of your estate, so this can be addressed in your will.
- do you actually want to rent the property out, with all the hassle this can entail? How will this property be advertised, let & managed - by yourselves (i.e. the 3 of you, equally putting the effort it) or will you (at a cost) have it managed?
- how long do you think you might plan to rent it for?
- are you ready for the various legislative aspects of becoming a landlord?
- how good a relationship do the 3 of you have and will it stand up to the additional complexity?
- when the boiler goes pop, or similar unexpected expense will everyone pay their share or will it lead to problems?
- what sort of condition is the property in... I've let two places I've previously lived in, with both problems came thick and fast.. things that had always been on my "to do" list as a live-in owner.
- post up some numbers of what the property might be worth, what it might rent for etc and people here can help guide you what level of income it could generate.
- IANAL but I'd echo was has been said wrt the solar panel "contract"; but (and apologies if I've missed it) I take it your father has also passed away?
- unless you have pressing financial circumstances then you don't need to rush, and given the current situation, you can't rush anyway. If you do need to rush, perhaps renting isn't for you, it's a long term thing really.
- tax wise, the profit (i.e. your share of rental income less allowable expenses) will be taxed as part of your income. No need to do anything clever here and the costs of doing so probably outweigh the potential benefit for one property.
- if one of you were to die, the share would be passed on as per your wishes as part of your estate, so this can be addressed in your will.
Eric Mc said:
Jasey_ said:
Hi Eric,
The deeds are currently in my mother name.
The signing over of the deeds is to me and my 2 siblings so we become the new owners.
So, you don't have to transfer anything. The property automatically goes to the three beneficiaries once probate has been granted.The deeds are currently in my mother name.
The signing over of the deeds is to me and my 2 siblings so we become the new owners.
Therefore, if it is rented out, the rental profits will be split three ways and each individual will have to return their share of the rental profits each year on their own personal self assessment tax returns.
If, at a later date the property is sold, and there is a capital gain on the sale (not always guaranteed), the gain is split between the three owners who will have to return their share of the gain to HMRC. One big change that occurred on 6 April is that Capital Gains and Capital Gains Tax on the disposal of residential properties is no longer part of the annual Self Assessment tax system. Instead, the individual who makes a gain has to notify HMRC and pay the Capital Gains Tax arising within 30 DAYS OF THE DATE OF THE DISPOSAL. This is new and I haven't had to handle any such transactions yet.
Can't believe they snuck this out so quietly
.
Jasey_ said:
We've agreed roles in the new arrangement and that should all be OK for the foreseeable - Of course things can change and go wrong but we can deal with that should it arise.
We have a war chest for maintenance and my Sister suggested we keep the rent on a yearly basis and then distribute rental money once all expenses have be settled. House is currently in pretty good shape and is in a small village next door to the town where Wren kitchens have just lodged plans for a huge investment so the market should remain buoyant for a while.
The solar panel lease has 12 years to run so we're all aware this is a long term plan - but we may re-visit if needs be.
Thanks for the pointers.
Don't count on the market doing anything we've ever seen before. (it may well do, but nobody knows how this thing is going to play out,)We have a war chest for maintenance and my Sister suggested we keep the rent on a yearly basis and then distribute rental money once all expenses have be settled. House is currently in pretty good shape and is in a small village next door to the town where Wren kitchens have just lodged plans for a huge investment so the market should remain buoyant for a while.
The solar panel lease has 12 years to run so we're all aware this is a long term plan - but we may re-visit if needs be.
Thanks for the pointers
.Edited by Jasey_ on Sunday 26th April 17:29
I’ve seen it when this sort of thing goes wrong and causes issues between the siblings over quite extended periods. Sadly, no matter how close a family, money can cause problems especially if siblings are in different financial situations or have quite different outlooks on life
It may seem a bit formal, but I’d suggest agreeing and writing out early how you’re going to manage the place what happens when one or more party wants to sell.
For example, do any of you get a higher returns or expenses covered for managing it? What are the spending limits before a collective decision is needed on something? if one party wants/needs out, how do you value it? What do you base any sibling “buyout” prices on? If you try to sell, do you want best price or quick sale?
It may sound formal, but better to deal with it early than when there is already a falling out.
It may seem a bit formal, but I’d suggest agreeing and writing out early how you’re going to manage the place what happens when one or more party wants to sell.
For example, do any of you get a higher returns or expenses covered for managing it? What are the spending limits before a collective decision is needed on something? if one party wants/needs out, how do you value it? What do you base any sibling “buyout” prices on? If you try to sell, do you want best price or quick sale?
It may sound formal, but better to deal with it early than when there is already a falling out.
DaveCWK said:
For info, you can buy out the solar panels so they are fully owned & transferrable with the house - the seller of the house I'm in the process of buying did exactly that. To give an idea of costs, 4KW panel set installed in 2016 cost them around £10k to buy out 3 years later.
We asked about that - they wouldn't entertain it as an option !Gassing Station | Finance | Top of Page | What's New | My Stuff