Land was acquired by H&W in joint names 20 years ago. H has recently died with W inheriting. W wants to transfer half the land to her children. The concern is the gift is treated as a gift of the half share acquired 20 years ago rather than the half share acquired from the H. Thus, giving rise to a substantial CGT liability.
Is there a “first in last out rule”? Does anyone have any thoughts on how we can ensure the Revenue will treat the gift as a gift of H’s share?
Will a Transfer referring to wife’s expectant share from H’s estate executed prior to the issuing of the grant of probate have any impact on the matter?
Depending on the IHT position, I believe it is possible to sever the joint tenancy via a deed of variation, and then to specifically gift that half share to the children with the benefit of a full tax free uplift.
I would have thought a deed of variation making the CGT but not the IHT election should be pretty conclusive. I can see the reason for your doubt but if the DoV refers to H’s share in the property, it should be clear.
Absent that (if 2 years have passed), it might be trickier as W would have a blended base cost on receipt. It might still be possible during the administration period as the two equitable shares are still distinct (but I don’t think pre- or post-probate is really relevant).
It appears to me this is the sort of case where a deed of variation could be used, taking advantage of the provisions of section 62(6) TCGA (but not section 142 IHTA).
On inheritance W owns 100% of the beneficial interest at a cost equal to 50% of the original acquisition cost plus 50% of the property’s market value at the date of death ie there is a single base cost for a single asset for CGT.
Assuming the beneficial interests were held as joint tenants then on the death of H, H’s 50% interest ceases to exist and automatically merges into W’s 50% interest; H’s 50% interest does not pass to H’s executors. If held as beneficial tenants in common H’s 50% would pass to H’s executors but, short of a DoV, I can’t see how your objective could be achieved.
As suggested above, a DoV seems to be the answer assuming 2 years since H’s death has not past.
If the property was held as tenants in common can the widow deal with her late husband’s share by a CGT-only variation before she receives it from the executors?
Whilst, technically, a beneficiary cannot make a specific gift of any asset within an estate until it is appropriated to them, such gifts are frequently made by deed of variation and I am not aware that any one has yet pursued the point (successfully or otherwise).