Appropriation of property deceased died 1991

Trusts Discussion
1

I am dealing with an estate in which the deceased died in 1991 but the estate was never administered. There are three beneficiaries namely a son, daughter and daughter-in-law who merely “shut up” the deceased’s home and left it. The local authority are now involved due to the property having been left empty for so long. We have obtained letters of administration and the proposal is that the son wishes to retain the property by purchasing the shares of the other two beneficiaries. There will be no cash assets left once various expenses e.g. legal fees, reimbursement of executors expenses have been paid.

The property has been valued at date of death at £40,000 and at date of probate as £120,000.

The intention to limit any capital gains tax has always been to transfer the property to the three beneficiaries so the personal allowances can be utilised. The son has spoken to his solicitor who has suggested a deed of appropriation to the three beneficiaries before the son purchases the shares from the other two beneficiaries.

I understand the beneficiaries will acquire the property at a base cost of £40,000 for capital gains tax and tax will be payable on the gain in their shares. I also understand the appropriation will be valued at date of the appropriation and this is the value which should be referred to in the deed of appropriation. However, I am confused as to the relevance of the appropriation value for any other issues? Does the above seem the best way to deal with this situation?

I also understand that the son will have to pay 3% SDLT on the purchase of the other shares in the property as he already owns a property.

Martin

2

I’m not sure in the present scenario the values at the date of appropriation have any particular relevance as between the three beneficiaries assuming the three beneficiaries are entitled to 1/3rd each of the property. If however the three beneficiaries had been left say A £30,000 B £40,000 C £50,000 then the value at the date of appropriation would be important as (based on £120k probate value for the property) A, B and C would each be entitled to 25%, 33% and 43% respectively of the property. Appropriation values at the date of appropriation were particularly important in the days of the nil rate band discretionary will trust when part of the family home was settled.

The value of the property at the date of appropriation could be taken as the market value and thus dictate the purchase prices of the interests of the other two beneficiaries.

The CGT annual exempt amount is available to the two selling beneficiaries but not available should the PRs make any sale.

Base cost for CGT is value at date of death.

Malcolm Finney

3

Thank you Malcolm you have confirmed my understanding and intended approach was correct. I think I was in danger of getting myself into a classic case of “overthinking”.

Martin