Varying an Estate - Tax Implications Beyond IHT and CGT ?

Discussion in 'Property Tax and Accounting' started by cm777, Dec 31, 2018.

  1. cm777

    cm777 New Member

    If a wife applies to vary an estate given to her entirely (moveable/immoveable assets) by a deceased husband with the law firm holding the that all moveable and immoveable assets go straight to the son and not come into her sphere of ownership, are there any obvious and not so obvious tax implications in doing this given :-

    Total assets of husband below IHT threshold.
    Immoveable asset will be 50% of principle residence of the husband and wife (it has never been rented to tenants)....and the wife will also gift her 50% of the main residence and move out to other accommodation.

    CGT - Primary residence, never let out.
    This flat was bought a considerable amount of time before, and so its value though not too high, has gone up 600% or so. Therefore, I'm just double-checking that by it going to myself, I don't fall into some CGT trap, or other obscure and tricky hidden tax liability !
    I guess the value of the flat gets registered at the time of transfer to me based on estate agent estimates, so any future CGT I have to pay will be based on current or near future values and not that original price they paid waaay back.

    This question comes under Scots Law if that matters.
    I know children have a claim in Scotland of a percentage of wills left entirely to a wife unlike the rest of the UK. But my mother is not contesting anything; rather, she prefers everything goes directly to myself, so she can see me get the benefit of it while she is alive as long as there is not some hidden giant minefield tax we have not factored in. :confused::confused::confused:

    Thanks in advance.
    Last edited: Dec 31, 2018
  2. Longterminvestor

    Longterminvestor Administrator

    I presume you have looked at any potential IHT liability?

    If the estate is sizeable I would look at how you might be able to make the proposed transfer and your mother's assets more tax efficient going forwards. If we assume your parents were roughly the same age then you might be going through a similar situation in the not too distant future with your mother's assets?
  3. cm777

    cm777 New Member

    Individually they both do not have more than 325k each.
    Both under the limits.
  4. FWL

    FWL Member

    I think the re-writing of the will in favour of you, the son, seems perfectly straight forward but I would double check with an accountant to see if there are any tax implications. Personally I cannot see any, but I am not a tax expert.
  5. cm777

    cm777 New Member

    Update : I was double posting, so there is one tax issue with this way.

    POAT - Pre-owned Asset Tax due to the gifter remaining in the property.
    A simple direct gift with reservation can potentially attract IHT, or secondly POAT at the new owner of the property's income tax rate on "notional open market rent" on any open market rent above 5000 quid (Less than 5k open market rent = POAT ignores lower threshold yearly notional open market rental income = no tax liablity on that lower than 5k rent).

    As there would be no IHT being below that threshold in this case, POAT WOULD be likely from the outset, or applied retroactively from the period when the owner became the tenant paying no rent. It seems if they cannot get you on IHT POAT would be pursued - but never both together.

    More headsplitting tax minefield stuff to deal with !
    Last edited: Jan 17, 2019
  6. FWL

    FWL Member

    If your mother does not have an emotional attachment to the property, what about selling in your mothers name (no CGT as she lives there?) and then she can downsize if she wanted, leaving the balance in the bank. Then your mother could make various tax free gifts over the years (I think the 7 year rule is still active?) to try and mitigate any future IHT bill.

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