I act for an Executor of his father’s estate, who died 12 years ago. The residue of the estate was divided equally between the Executor and his three sisters.
The estate consisted of a property subject to a mortgage and the Executor has since the father’s death remained living in the property and is still making payments under the interest only mortgage.
He wants to transfer the ownership of the property into his sole name and has confirmed that his sisters are happy to gift him their entitlement to the property. I proposed too arrange for him and his sisters to enter into a non-retrospective Deed of Variation and the Executor has agreed to settle any CGT owed on the transfer out of the estate, from his own funds.
I have spoken with an accountant who believes that I am incorrect in deeming that the CGT libaility is that of the estate and he states that the CGT liability will rest with the siblings giving away their interest in the property.
The property formed part of the residue of the estate, remains in the deceased’s name and no memo of appropriation has been prepared to appropriate the shares in the property to the residuary beneficaries.
Am I missing something?
I think this all depends on what is actually happening here. In your message you state that the sisters are “happy to gift him their entitlement to the property”. Clearly this implies that they are the ones making the gain and disposal.
However, if the estate is selling the property to the executor, (and sisters have consented), then the estate is selling the property and responsible for the gain. (There may be an argument that as the residue has been ascertained but that will probably lead to a split opinion - see Capital Gains Tax Query - #21 by malcfinney1 )
Many thanks for the response. The gift from the sisters referred to the fact that the DOV would not be retrospective and therefore they would be making a gift for IHT purposes.
Under the DoV the three sisters are assigning their respective interests to the brother which gives rise to potential CGT charges (subject annual exempt amounts) on each of their interests assuming no CGT reading back under s142. If CGT reading back, then no CGT charge on any of the three sisters.
Malcolm Finney
Haroon: Even I didn’t know I’d written that !