Grandfathers will, inheritance tax and cap gains tax
Discussion
Hi everyone,
Hoping someone has the knowledge to clear up some q’s my father has thrown at me this evening. He is a beneficiary along with his two siblings and also my grandfathers wife. He doesn’t seem to be getting told much as he doesn’t live near the executor of the Will whereas my auntie does and relays the information to my father.
My grandfather had three properties. In his will it states two properties are to be sold and the proceeds to go to his three children.
- if it states in the will that they are to be sold do they have to be sold by the executor?
My father is under the impression that they might be going into their names and then sold which may affect Aunty/ uncles capital gains tax if they were to make improvements to the house and sell them.
The Will then states the third property my grandfathers wife can live in until she passes away and then the house can be sold and the proceeds go to dad/ Aunty/ uncle.
- Can she disassociate herself with this property via deed of variation in exchange for an x amount of money?
I don’t think she wants to stay at the property understandably.
The estate looks to be around £400k comprising of the 3 properties.
I’ve googled inheritance tax with the limit being £325k. As the properties are going to descendants am I right in saying no IHT will be due as the limit goes to £500k?
Or with the properties being sold as the Will states, inheritance tax will be due as the £500k only applies if the properties aren’t being sold and are being given my grandfathers children?
My father wanted to just sit back and let it all be sorted out but there’s a lot happening to which I’m being asked to Google quite a bit now to try and find out the basics of what might happen.
Hoping someone has the knowledge to clear up some q’s my father has thrown at me this evening. He is a beneficiary along with his two siblings and also my grandfathers wife. He doesn’t seem to be getting told much as he doesn’t live near the executor of the Will whereas my auntie does and relays the information to my father.
My grandfather had three properties. In his will it states two properties are to be sold and the proceeds to go to his three children.
- if it states in the will that they are to be sold do they have to be sold by the executor?
My father is under the impression that they might be going into their names and then sold which may affect Aunty/ uncles capital gains tax if they were to make improvements to the house and sell them.
The Will then states the third property my grandfathers wife can live in until she passes away and then the house can be sold and the proceeds go to dad/ Aunty/ uncle.
- Can she disassociate herself with this property via deed of variation in exchange for an x amount of money?
I don’t think she wants to stay at the property understandably.
The estate looks to be around £400k comprising of the 3 properties.
I’ve googled inheritance tax with the limit being £325k. As the properties are going to descendants am I right in saying no IHT will be due as the limit goes to £500k?
Or with the properties being sold as the Will states, inheritance tax will be due as the £500k only applies if the properties aren’t being sold and are being given my grandfathers children?
My father wanted to just sit back and let it all be sorted out but there’s a lot happening to which I’m being asked to Google quite a bit now to try and find out the basics of what might happen.
Have the executors appointed solicitors to deal with the estate or are they trying to DIY it?
Has he actually received a copy of the Will? If not, he should ask the executors/solicitors for one.
Executors are under a legal obligation to carry out the Will as written and, if they fail to do so, will be personally liable to compensate any beneficiary who doesn't receive what they should.
You never pay CGT and IHT at the same time. Death, with or without the payment of IHT, sets all gains to zero in the hands of the executors.
Executors will incur capital gains tax liability on any gains made during the administration period.
Example:
Deceased bought a house in 1990 for £50,000 and had no assets apart from that house.
At date of death in 2021 the house was worth £200,000 so there has been a gain of £150,000
The house goes into the hands of the Executor at £200k value
Executor puts the house on the market and it takes a while to sell during which time the market rises - it eventually sells for £215k
The gain of £15k in the Executor's ownership falls within the scope of CGT.
The estate gets an annual allowance of £12,300 for CGT purposes, just like anyone else.
CGT will be payable on £2,700 of gain. (15,000 - 12,300)
Has he actually received a copy of the Will? If not, he should ask the executors/solicitors for one.
Executors are under a legal obligation to carry out the Will as written and, if they fail to do so, will be personally liable to compensate any beneficiary who doesn't receive what they should.
You never pay CGT and IHT at the same time. Death, with or without the payment of IHT, sets all gains to zero in the hands of the executors.
Executors will incur capital gains tax liability on any gains made during the administration period.
Example:
Deceased bought a house in 1990 for £50,000 and had no assets apart from that house.
At date of death in 2021 the house was worth £200,000 so there has been a gain of £150,000
The house goes into the hands of the Executor at £200k value
Executor puts the house on the market and it takes a while to sell during which time the market rises - it eventually sells for £215k
The gain of £15k in the Executor's ownership falls within the scope of CGT.
The estate gets an annual allowance of £12,300 for CGT purposes, just like anyone else.
CGT will be payable on £2,700 of gain. (15,000 - 12,300)
On the IHT limit going from 325 to 500k, I'd question if that relates to primary property only ?
i.e. the house where your grandfather lived rather than the other properties that he owed (presumably rented out).
.gov site here is unclear https://www.gov.uk/inheritance-tax/passing-on-home
"If you own your home (or a share in it) your tax-free threshold can increase to £500,000 if:
you leave it to your children (including adopted, foster or stepchildren) or grandchildren"
It depends on the definition of "home" - a rented property ? probably not. a 2nd residence/holiday home ? maybe ?
i.e. the house where your grandfather lived rather than the other properties that he owed (presumably rented out).
.gov site here is unclear https://www.gov.uk/inheritance-tax/passing-on-home
"If you own your home (or a share in it) your tax-free threshold can increase to £500,000 if:
you leave it to your children (including adopted, foster or stepchildren) or grandchildren"
It depends on the definition of "home" - a rented property ? probably not. a 2nd residence/holiday home ? maybe ?
rockin said:
Have the executors appointed solicitors to deal with the estate or are they trying to DIY it?
Has he actually received a copy of the Will? If not, he should ask the executors/solicitors for one.
Executors are under a legal obligation to carry out the Will as written and, if they fail to do so, will be personally liable to compensate any beneficiary who doesn't receive what they should.
Thank you for replying Rockin. Has he actually received a copy of the Will? If not, he should ask the executors/solicitors for one.
Executors are under a legal obligation to carry out the Will as written and, if they fail to do so, will be personally liable to compensate any beneficiary who doesn't receive what they should.
Solicitors are dealing with the will, yes.
My father has received a copy of the Will to which it states the properties are to be sold and proceeds split between the 3, I’m not too sure why he is asking questions about IHT and CGT. It was my Aunty who had put it in his head as apparently she has sold a second home this year and used some of her CGT allowance. It doesn’t affect my father.
Thank you for the example. It was as I thought and that the estate will be the one that pays and not my father.
Crafty_ said:
On the IHT limit going from 325 to 500k, I'd question if that relates to primary property only?
That’s a good question. The solicitor who is dealing with the will has told my father he cannot answer any questions as he is a beneficiary and not the client. The executor is my grandfathers sister who is late 70s and I think doesn’t want much to do with it all.
CharlieH89 said:
The solicitor who is dealing with the will has told my father he cannot answer any questions as he is a beneficiary and not the client.
The executor is my grandfathers sister who is late 70s and I think doesn’t want much to do with it all.
A solicitor can only deal with the client (ie the executor), just as a bank will only talk to the account holder.The executor is my grandfathers sister who is late 70s and I think doesn’t want much to do with it all.
But the fact the executor isn't very interested suggests to me that the solicitor will manage it and charge accordingly, maybe a percentage of the estate. Never give these types an open chequebook.
Can the grandfather's sister - as she has no interest in being executor - delegate the position to another family member/s?
Simpo Two said:
CharlieH89 said:
The solicitor who is dealing with the will has told my father he cannot answer any questions as he is a beneficiary and not the client.
The executor is my grandfathers sister who is late 70s and I think doesn’t want much to do with it all.
But the fact the executor isn't very interested suggests to me that the solicitor will manage it and charge accordingly, maybe a percentage of the estate. Never give these types an open chequebook.The executor is my grandfathers sister who is late 70s and I think doesn’t want much to do with it all.
Can the grandfather's sister - as she has no interest in being executor - delegate the position to another family member/s?
I believe if my grandfathers sister stepped down from being the executor then it would be my grandfathers wife who would deal with it. I don’t think the executor could change it so that the my father/Aunty / uncle could be the executor?
Since the will came out my grandfathers wife has stopped speaking to my father and his siblings through no fault of their own, seems she has just cut all communication with them.
CharlieH89 said:
I believe if my grandfathers sister stepped down from being the executor then it would be my grandfathers wife who would deal with it. I don’t think the executor could change it so that the my father/Aunty / uncle could be the executor?
I'm simply quoting the internet here but https://www.co-oplegalservices.co.uk/media-centre/...says (my bold):
'Renunciation as Executor
If a named Executor does not want to get involved in dealing with the Estate, they do not have to. They might be elderly, unwell, or simply not have the time.
If an Executor wants to permanently free themselves of the responsibility of dealing with an Estate in England or Wales, they need to sign a document called a Deed of Renunciation. This basically means that they are resigning from the job of Executor. Once they have renounced by signing the Deed of Renunciation, their appointment as Executor is cancelled. Someone else – usually one or more of the Beneficiaries named in the Will – will then have to step in and do the job instead.
If an Executor wants to renounce, they should do so as soon as possible and refrain from becoming involved in the Estate administration process. Things can get complicated if an Executor starts dealing with an Estate but then decides they don't want to be involved. It is much better to make the decision early on.'
I think you either try to get the executor changed for someone who wants to do the job, or ignore the whole thing, let Mr Solicitor fill his boots whilst sorting out the tax and taking a year to get Probate, and if a cheque eventually comes your way, cash it.
leef44 said:
I thought the CGT is relieved against the IHT i.e. CGT is due but then is taken off against the IHT due on that asset. Someone with more up to date knowledge can confirm.
^^^ That is not correct. I posted a correct explanation earlier in this thread. CGT is irrelevant at death.I'd stick with a competent probate solicitor for specific IHT and related matters. They generally see much more of it than the accountants.
You can assent properties to beneficiaries at point of a sale contract being completed.
Ie, hops from estate to beneficiary to buyer in one step.
This allows you access to potentially preferential cap gains rates and allowances.
Ie, you and your wife could get your 1/3rd share of a house sale say.
So rather than having 1/3rd of estates liability at 28pc and 1/3rd of £12,000 allowance, you’d get your 1/3rd with possibly less than 28pc (depending on income), and you’d get £25,000 allowance.
If there are say 3 married couples as beneficiaries you might be able to get access to £75,000 of capital gains allowance.
So possibly many thousands of pounds more for each beneficiary.
Apparently HMRC might let this go or might query it, but the accountant and solicitor seem to think this is fine.
It definitely makes sense that the beneficiaries be executors if the current family member executor has no interest, and then employ a competent solicitor.
Also worth noting is that deeds of variation can only occur within 6 months is it?
Also cap gains allowance ends after 2 years is it?
Definitely take good professional advice!
Ie, hops from estate to beneficiary to buyer in one step.
This allows you access to potentially preferential cap gains rates and allowances.
Ie, you and your wife could get your 1/3rd share of a house sale say.
So rather than having 1/3rd of estates liability at 28pc and 1/3rd of £12,000 allowance, you’d get your 1/3rd with possibly less than 28pc (depending on income), and you’d get £25,000 allowance.
If there are say 3 married couples as beneficiaries you might be able to get access to £75,000 of capital gains allowance.
So possibly many thousands of pounds more for each beneficiary.
Apparently HMRC might let this go or might query it, but the accountant and solicitor seem to think this is fine.
It definitely makes sense that the beneficiaries be executors if the current family member executor has no interest, and then employ a competent solicitor.
Also worth noting is that deeds of variation can only occur within 6 months is it?
Also cap gains allowance ends after 2 years is it?
Definitely take good professional advice!
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