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TonyTax
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15942
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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My mother has recently died and left a will. However, probate

Customer Question

My mother has recently died and left a will. However, probate has stated that the will is invalid due to the witness signatures being in the wrong place. As I'm the only child, I'm assuming the estate will come to me. However, I wish to honour my mothers wishes and allocate the funds according to her will. The amount of the estate is approx £100k below inheritance tax. If I give the sums of money that my mother wished the estate to be allocated (25% each between 4 people incl myself), will I or they be penalised tax wise
Submitted: 2 years ago.
Category: Tax
Expert:  TonyTax replied 2 years ago.
Hi.

Your mother's estate appears not to be liable to Inheritance Tax.

If the estate assets come to you at the end of the probate process because the will cannot be validated, you are free to do with those assets what you wish. If you make gifts to the other three individuals they will not be taxable on those gifts. So long as you live for seven years after making the gifts, their value will not be included in your estate for Inheritance Tax purposes. Take a look here for information on who pays IHT.

If you have to sell assets to realise cash to gift to the others, your cost for CGT purposes will be the value of those assets on the date your mother passed away.

Use the checker here which gives a guide as to how an intestate estate is distributed if you haven't already definitively determined that.

I hope this helps but let me know if you have any further questions.
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Customer: replied 2 years ago.
Part of the estate is my mothers flat which is in the process of being sold. Does cgt come into play?
Expert:  TonyTax replied 2 years ago.

If the flat is sold by the estate before being put into your name, then CGT will only be payable if it is sold for at least £11,000 more then the probate value. The first £11,000 of gains made by a deceased estate are exempt in the tax year of death and for each of the next two tax years. Take a look here for more information.

If the flat is put into your name, you can sell it and pay no CGT so long as the gain is no more than the annual CGT exemption of £11,000. The probate value will be your cost for CGT purposes.

Customer: replied 2 years ago.

Hi sorry I'm a little confused by the reply so lets make it easier and use figures. On completing the paperwork for probate, flat was valued at £205k. On putting the flat on the market, it went on at £215. We have an offer at £212k (which we're likely to accept). Now I'm assuming that any costs in selling the flat are not part of this equation (if they are then they are est. at £3.5k). Based on the above, is CGT liable?

Expert:  TonyTax replied 2 years ago.
If you sell the flat for £212,000, the gain will be £3,500 (£212,000 - £205,000 - £3,500). £3,500 is less than £11,000 so there can be no possibility of CGT.