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Ask Buachaill Your Own Question
Buachaill, Barrister
Category: Law
Satisfied Customers: 10955
Experience:  Barrister 17 years experience
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Customer Question

Mother died in 2006 and I was her executor. I also inherited the bulk of her estate after a few bequests. The family wanted to try and retain the family home and as I and my husband decided it was too much to cope with, my younger son and family moved in. Now my son needs to move so the house is on the market. The house is still registered in my mother's name so I am wondering if it is transferred to my son's name, he can sell it as his residence and avoid CGT. Is this a possibility or are there ramifications.

Submitted: 2 years ago.
Category: Law
Expert:  JGM replied 2 years ago.
Thank you for your question.
Do you have a broad idea what the house was worth when your mother died and what it is worth now?
Customer: replied 2 years ago.

£350000 in her probate - hopefully will make over £400,000. Since the probate £40000 has been spent o it.

Expert:  JGM replied 2 years ago.
If the executor transfers the house to your son with a date of entry of when he actually moved in there is nothing wrong with that as he has actually lived there, just not with a registered title. Then he sells and he has private resident relief therefore no CGT is payable.
Customer: replied 2 years ago.

Further to your reply - as executor ref the question above - if I transfer the house to my son as suggested are there any implications for me? Is it ok to 'alter' my mother''s Will?Could you confirm that if I gifted the house to my son and he has lived there since the latter part of 2007 - inheritance would no longer come into it - as it is over 7 years ago? Should I have declared anything on my tax return

Expert:  JGM replied 2 years ago.
You are entitled to decline the legacy and transfer it to whoever you want. The seven year rule doesn't apply to CGT. So it's actually the estate passing title to your son and he has lived there throughout.
Alternatively, and a better way, you just treat this as the estate selling the home and again there is no CGT payable. In other words don't transfer the house at all. Just dispose of it as executor.
Customer: replied 2 years ago.

could you please confirm that this is UK law.? and if I sell the house as executor can you please confirm that there is no liability from any Capital Gains there may be on it.

Expert:  JGM replied 2 years ago.
Under UK law, given the time that has passed there is a potential CGT liability. Do you know the value at the date of death and the value now?
Customer: replied 2 years ago.

value at date of death £350,000 and am hoping for £400,000 - but also £30,000 spent on it since she died.

That was one of the reasons I wondered if I could transfer to my son as it has been his principal residence since 2007/8 so if he sells and buys another house CGT would not be incurred, would it?

Expert:  JGM replied 2 years ago.
I don't think you need to if the increase is only going to be about £50000. With the annual exemption and capital expended as well as costs of sale, that would wipe out any CGT liability.
Expert:  Buachaill replied 2 years ago.
1. There are two issues here. Firstly, any liability the estate of your mother might have to Inheritance TAx and Secondly, any liability your son might have to Capital Gains TAx should he sell the house. Firstly, as the house is still in your mother's name, probate has not been completed. From what you say, you were the beneficiary under this will. Here the exemption from tax a person dying on or before 5 April 2006 was £275,000. After 6 April 2006, it was £285,000. The house was valued at £350,000 for probate purposes. So there is a liability to Inheritance Tax in the hands of the beneficiary. If the house is still in your mother's name, then probate has not been completed and this Inheritance Tax liability is still owing. If you were the beneficiary of the house, then this liability is still owing by you as executor of the estate.
2. This Inheritance Tax liability can be dealt with by administering the estate and completing Probate. However, as things stand, the house is then inherited by you as beneficiary and not your son. The house would then today be sold by you, not your son, as you are the owner. If you want your son to be the owner and thereby benefit from the Principal Private Residence exemption from CGT, then he must be owner. HOwever, it is only if you wish your son to have the monies from the sale that you would want him to be the owner. You cannot benefit from the CGT exemption unless a person is the owner. It is not sufficient simply to live there.
3. If you wish your son to be owner of the house, then you can execute a Deed of Variation of your mother's will, because Probate has not been completed, whereby you Vary the terms of the will, such that your son is now the beneficiary of your mother's will in respect of the house. This Deed of Variation would thereby transfer ownership of the house to your son. However, you would need to complete Probate and pay any tax liability in order to adopt this step.