By deed of gift my mother transfer her house to my brother and I some 9 months ago. She was then rehoused by?

Question

the local authority as the house was in poor repair. If my brother and I sell the house now and give back some of the proceeds to our mother, will we be liable to pay CGT on the whole market value of the property or just the amount we keep after seeing our mother financial ok. None of us can afford to maintain the house. Our mother is 75, I am on a small ill health retirement pension and my brother is in the low income bracket.

Answer 1

Your question involves a number of transactions which have to be looked at separately to ascertain the tax treatment.

First your mother gifted her house to you and your brother. There are two aspects to this.

First, inheritance tax . Did she continue to live in the property after the gift? Your point about the local authority rehousing her because of the condition of the property would imply this. If so then the value of the house will still be counted as part of her estate. (If she didn't the tranfer would be Potentially Exempt and would fall out of the estate after seven years.)

Now, Capital Gains Tax. She made a disposal which is deemed to have taken place at market value. She would have no liability because it was her only residence. But you will be deemed to have acquired it at this market value.

If you now sell the house then any gain would be subject to CGT. This may not be too significant as both you and your brother have an annual exemption of £9,200. That is assuming you have no other gains in the year. How much has the property increased in the last 9 months?

By the way the gain will be calculated using the selling price of the property. What you do with the proceeds afterwards has no bearing on the calculation.

If you then make a cash gift to your mother then this will be a Potentially Exemt Transfer for Inheritance Tax purposes. Only this time the moneys will be counted as part of your (or your brother's) estate if either of you die within seven years.

It is possible , as you can see, that your mother's estate could include both the value of the house and some of the proceeds of its sale. Without any figures I have no way of knowing if this is relevant. I would suggest you take some professional advice just to ensure that no adverse consequences flow from your actions.

Answer 2

I have been divorced from my kids' dad for 7 yrs. he still will get me a little card or a candle on my birthday or x-mas "from the kids". She IS after all the mother of his baby. They are suppose to get along for the child's sake. I would be more concerned about the fact that he hid it from you. What else is he hiding????

Answer 3

GO AND SEE A SOLICITOR first question is free or cite citizen advice