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Joshua
Joshua, Lawyer
Category: Law
Satisfied Customers: 25430
Experience:  LL.B (Hons), Higher Prof. Dip. Law & Practice
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. My wife and I inherited her family home in 1997

Customer Question

Hello.
My wife and I inherited her family home in 1997 (value £90,000). We totally refurbished the house and successfully let it for over 10 years. We sold it in February 2014 for £365,000. At the time I was unaware of Capital Gains tax, or we would have done things differently.
However, the letting business was on a 50:50 basis between us for tax purposes. My share of the bill I have managed to arrange with HMRC to pay off at £400 monthly.
My wife unfortunately died about 3 months after we sold the house. I had to complete a 'Property pages' self assessment tax return for her for 2013 - 2014. Her share of the gain was computed at £121,894, and the tax due on this was computed at £27,850.
I am told that this should be paid out of my wife's estate. What I want to ask is how this should be done when her estate had practically nothing in cash terms. She left everything in her will to me - this included all her possessions, including her half shares in our own house and a small flat which is let (both of which we owned as joint tenants); her half share in an acre of unproductive land (which it appears we owned as tenants-in-common), as well as her household possessions, etc. The Probate statement was that "the net estate is nil", and that "to the best of my knowledge information and belief the gross estate passing under the grant amounts to £11,547". This figure was made up of £6,442 of Household and personal goods, £105 of cash, and £5,000 being her half share of the piece of land mentioned above.
The proceeds of the sale of the let house were used to pay off its outstanding mortgage, and also to clear the mortgage on our own house, which had come of age (we had to sell the let house as the only way we could clear our mortgage). There was nothing left.
I would be most grateful for your comments regarding the CG bill. Am I now responsible for it?
Finally, my wife also had debts of over £8,000 on several credit cards. Can you also tell me please if I am now liable for these debts?
Thank you.
Nick
Submitted: 2 years ago.
Category: Law
Expert:  Joshua replied 2 years ago.
Joshua :

Hello and thank you for your question. I will be very pleased to assist you. I'm a practising lawyer in England with over 10 years experience.

Joshua :

May I confirm how much roughly how much was owing on your mortgage at the time of your wife passing please?

Joshua :

Did you apply to act as executor of your wifes estate?

JACUSTOMER-0fdunfzr- :

Hello Joshua

Joshua :

Hi there

JACUSTOMER-0fdunfzr- :

just over The mortgage outstanding on the let house was £172,000, and that on our own residence was just over £188,000.

JACUSTOMER-0fdunfzr- :

Yes I was the executor of my wife's estate.

Joshua :

Thanks. You are not liable for your wifes debts including debts to HMRC nor her credt card debts. The value of her estate would include 1) a half share of any equity in your joint home 2) any cash in bank accounts etc 3) any equity in any other land or property she owned and 4) the value of any other assets of investments including a notional value of any possessions if they have any monetary value.

Joshua :

Accordingly HMRC and credit card providers etc will not be able to claim against you personally for any debts but rather are limited to claiming against your wifes assets as set out above

JACUSTOMER-0fdunfzr- :

So to be clear, even though part of the value of my wife's estate now resides in what is now my residence and part in what is now my let flat, I do not have to, for example, sell the flat in order to pay HMRC for my wife's Capital Gains tax bill?

JACUSTOMER-0fdunfzr- :

I'm afraid I have to go back to work now - I came home for lunch to see if I had a reply. I will access it again about 6p.m.

JACUSTOMER-0fdunfzr- :

Many thanks.

Joshua :

Creditors (including HMRC) only can claimagainst your wifes assets as at the date of her passing. This is probably best set out in a simple example:

Joshua :

Let us say B dies owning jointly a property worth £200K with a mortgage of £100K and a debt to a credit card of £10K. Bs share in the jointly owned property is half of £200K less half the mortgage therefore it is £200,000 / 2 -£50K. Bs net equity in the property is therefore £50K. B owes £10K against a credit card and that creditor could claim against Bs £50K net equity share of the joint property but nothing more. In this example, there is sufficient money to pay the credit card debt albeit locked up in the jointly owned property.

If B owed £100K insted of just £10K though, creditors could still of course claim the £50K equity B has in the jointly owned property but would not be able to recover the the balance as there is insufficient net equity.

Joshua :

Obviously the above is a simple example and your situation is more complex but the same principles apply so it is just a case of applying those principles in respect of each asset to calculate the equity your wifes estate held in the asset at the date of her passing. Creditors are limited in their claims to any equity your wife held in those assets - they cannot claim against your equity or against you personally.

Joshua :

If there is insufficient equity in your wifes estate to cover the demands you must proceed very carefully as executor as the estate will be technically insolvent - though I am not sure this is the case from the information you have provided. If this is the case consider contacting the insolvency service to assist you in administering the estate as there is a strict order you must pay out to creditors.

Joshua :

Assuming there is sufficient equity but the equity is locked up in property, creditors can seek to secure their debts agaisnt those properties (albeit they cannot touch your sare of the equity as above). They can go on to seek orders for sale. Such orders are comparatively rarely granted in respect of a property you are living in but may be more readily granted in respect of an investment property you do not live in.

Joshua :

Is there anything above I can clarify for you?

JACUSTOMER-0fdunfzr- :

Hi Joshua

JACUSTOMER-0fdunfzr- :

Many thanks for your answer. I'd forgotten I was going out with my daughter this evening, so I've printed off your reply and will study it to see if I need any more clarification. Thank you for offering that.

Joshua :

No problem.

Joshua :

I am glad the above was of assistance. If I can assist any further please do not hesitate to revert to me

Joshua :

If you have no further questions for now I should be very grateful if you would kindly take a moment to rate my service to you today. Your feedback is important to me. If there is anything else I can help with please reply back to me though. I hope you enjoy your evening.

Customer: replied 2 years ago.

Sorry for the delay in replying. I must say that you got my hopes up with your original answer that "You are not liable for your wifes debts including debts to HMRC nor her credt card debts". However, your later answers show me that I am liable, in that I have to pay off HMRC; if not, then my wife's creditors would not be able to pursue claims against the property - disappointing but realistic, and I suppose what I expected but wanted clarifying.

Expert:  Joshua replied 2 years ago.
To be absolutely clear, you are not liable personally - i.e. you are not liable from your own assets. Only your wife's assets can be claimed. Of course you are right that in the case you have inherited your wifes assets, and these assets exceed the amount of debt owed, this is an academic distinction but it would be very relevant if the debts were larger than your wifes assets in that the creditors cannot claim more than your wifes assets.

Can I help you with anything else or has the above answered your questions satisfactorily?
Joshua and other Law Specialists are ready to help you
Customer: replied 2 years ago.

Thank you Joshua for your help.

Best wishes

Nick

Expert:  Joshua replied 2 years ago.
A pleasure. Best wishes.