My question relates to whether a Capital Gains Tax liability can be avoided or mitigated on a gain that arose on a property that could not be sold whilst the estate was in dispute. It was and still is occupied by one of the litigants and beneficiaries.
I will try and be concise as possible, but the facts are as follows:
A client’s relative died in 2013 leaving her house then worth £475,000 among 10 residuary beneficiaries, one of whom (D) is occupying the house. A dispute ensued as a later Will was submitted to probate by D (written by him) when the tastatrix’s capacity was at best questionable.
Before reaching Court, the parties agreed to settle on the basis that D shall receive 48% and the others the remaining 52%.The court order states that D can remain in occupation until no later than 1st February 2017.
It was also agreed that the original Will be submitted for probate. The executor has received an offer of £730,000 and so would like to know if there is any way round the CGT liability.
He appreciates that the property can be assented to the beneficiaries before it’s sold which only partly deals with the problem and in any event finds this undesirable in the circumstances.
Is there any other way of avoiding or minimising the liability? Any advice or suggestions would be much appreciated. Alternatively, if anyone can suggest a CGT specialist that I can refer the client to I would appreciate it.
Given that there is an actual disposal and it is clearly being made at a gain over the probate value, it seems difficult to contemplate any way of reducing the tax other than via an assent.
You could run it past (jnr) tax counsel if the client is persistent but I would not be in any way optimistic in these circumstances.
Osborne Clarke LLP
Assenting to the beneficiaries must be the most sensible way forward here. Note that, if the PR assents the property in equity then the sale proceeds will still be received by him and there may be other ways to protect the position of the PR if that is the cause of the reluctance to do this.
In the event, D’s share of the net proceeds should be exempt from CGT by virtue of principal private residence relief (although best to assent some time before sale). The other nine beneficiaries will make gains of £14,733 each (I assume they each have an equal share of the 52%) but if any of them are married they can (with an appropriate deed of gift) divide the gain in two.
I am ignoring the possible CGT implications of the beneficiaries having re-allocated the estate between them. You should read CG31900 and onwards and consider if there are possible implications.
Thank you for your post.
Assuming the PR assents the legal title to himself and 3 carefully selected trustees and states on the assent that they are holding the property on trust on behalf of the residuary beneficiaries of the will of X deceased, what would be the best mechanism to ensure he can recover all his out of pocket expenses from the sale proceeds?
I understand from your post that if there is capital gains tax to pay on a property of a deceased’s estate, an Assent of the equitable (beneficial) interest in the property (i.e. not an assent of legal title) to the beneficiaries will prevent the 28% tax being charged and paid out of the Estate and would be paid by the individual beneficiaries. The legal title would remain in the name of the deceased until sold.Kindly confirm I have understood this correctly. Thank you.