I have a question about CGT & estate accounts relating to an assented property - I am going round in circles and probably overthinking though…
The estate has various properties within it and there are 7 residuary beneficiaries with 2 of them (daughters) entitled to a higher percentage of the residue. The daughters are considering taking one of the properties as an investment and the estate is large enough for them to do this as part of their entitlement to the residue.
The property has gone up in value since the d.o.d. from £250k to £300k so where do the daughters stand for CGT purposes on the assent without disadvantaging the other residuary beneficiaries in respect of the £50k increase in value since the d.o.d.?
The property will be revalued as at the date of appropriation for the purposes of the appropriation (applying Re Charteris 1917), although the daughters will take the property as legatees at probate value for CGT (s.62(4) TCGA 1992).
Paul Saunders FCIB TEP
Independent Trust Consultant
Providing support and advice to fellow professionals
Thanks - the property is being assented rather than appropriated because the daughters intend to rent it out and receive the income for a while.
That is what I was struggling with because it seems the daughters lose out both ways - their base value for CGT is £250k but they have to account to their co-beneficiaries for the additional £50k in the Estate Accounts.
The appropriation of the property to the daughters is made at market value at the date of the appropriation (unless the will contains provision for appropriation at date of death/probate value) which means if the property’s value has risen since the date of death the property appropriated will take a greater percentage of their residuary entitlement.
For CGT, the daughters take as legatees and hence their base cost for CGT is the value at the date of death/probate value.
I apologise if this seems like splitting hairs, but assent and appropriation are not alternatives – even if it is not recognised as such an appropriation must precede, or occur at the same time as, the assent otherwise the beneficiaries have no right to the assent.
Paul Saunders FCIB TEP
Independent Trust Consultant
Providing support and advice to fellow professionals
I am replying to this as I have a similar situation.
Estate has 2 properties, one is a rental property and one is the deceased’s home. Plus some cash.
Beneficiaries 2 brothers, 50/50 residue.
The deceased home they will take 50/50 ownership of.
The rental property, Brother A does not want this so Brother B will want 100%.
The idea is for Brother A to take all the cash. Say that is worth 15% of the property, Brother B will take 65% of the property.
Brother A will then give up the other 35% for a cash payment from Brother B.
I would have thought this is a disposal for CGT purposes and A will have a MV disposal of his 35% (property has increased in value since death).
However it has been said to me that any cash exchanging hands between beneficiaries is a matter for them to decide, and no mention is made of CGT.
Is that correct? So Brother B will effectively have 100% of the property obtained at probate value for CGT, paid A for 35% of the property but no tax relief on that payment.
A gets tax free cash.