Can anyone advise on inheritance tax/gift?

[MushroomTree]

Long story short my grandmother gifted my mother her house and smallholding 5 years ago.

My grandmother now lives in a care home and my mother lives on the smallholding.

The house and land was valued last year at £250,000 absolute max. It's likely to sell for less as it's in need of total renovation.

My mother is now looking to sell. Can anyone advise how much inheritance tax she's likely to pay?

My understanding is that there are certain exemptions for agricultural properties.

Thank you

Well firstly it's not inheritance tax, that would only be applicable if your grandmother dies in the next 2 years

Who is being for the care home?

You mother may be subject to capital gains tax on the sale. Is she living in the property or has she rented it out?

She really needs to speak to an accountant

The care home is mostly state funded with a top up from my grandmother's own bank account.

My mother lives on the smallholding.

We knew about the 7 year gift rule but for various reasons my mother needs to sell asap rather than wait another two years.

She's going to see an accountant but I wondered if anyone else could advise in the meantime.

Surely this comes under deprivation of assets if the state is funding care. Bu gifting the property your grandmother/mother has deliberately deprived the state of assets to fund care and funds could be clawed back.

She would potentially be taxed for cgt on the value increase since she was gifted the property but there are allowances to offset and if it was her principle private residence there will be exemptions to apply. Has LA agreed that the gift was not to hide the asset value from being taken into account for the care home fees or might they expect reimbursement from the sale?

@Bohemond I can assure you it is not deprevation of assets and has been ruled as such by the local authority.

My grandmother was still living in the property with my mother after she signed it over.

Unfortunately after that she developed various medical problems which meant she could no longer live there and needed to move into a care home so that her care needs were met.

@LIZS the property hasn't increased in value. It's in a poor state of repair and my mother hasnt made any improvements.

It was her only property.

If your mother has lived with your grandmother and was living there when it was gifted there shouldn't be cgt to pay due to ppr.
Inheritance tax may be payable if your grandmother passes away in the next two years.
I don't see what is stopping your mother selling now, as long as she keeps back some funds for potential iht but I would still suggest taking proper advice.

IHT nil rate band is a minimum of £325,000 so unless your DGM has significant other assets it’s not going to be a problem and you don’t need to get into the agriculture thing.

Thanks @Flamingolegs.

The idea was that they lived there together and mum took over the farm. Unfortunately my grandmother had several strokes and the property is remote and unsuitable for adaptations for someone with mobility issues so she had to go into a care home.

The house was gifted to my mother the same week she moved up there with an agreement that my grandmother could live there for as long as she was willing and able.

I thought that @Temeraire. There aren't any other significant assets. The money she does have left is going on care home fees and rapidly depleting.

My mother has a lot going on at the moment and I think someone has mentioned Iht/cgt and she's panicked.

We knew about the 7 year gift rule but for various reasons my mother needs to sell asap rather than wait another two years

Sounds like you don't understand what the 7 year rule is, it doesn't have anything to do with whether your DM sells the property now or in two years time, that's irrelevant. The 7 year rule relates to gifting, and whether the person (in this case your DGM) making the gift, lives on for 7 tax years beyond the giving (in this case the property).

So 5 years ago your dm moved in to your dgms property with her, and it was signed over to your dm. Why was this done? Where was your dm living before that? This does sound like a classic case of wilful deprivation of assets I'm afraid.
You say that the LA have accepted that it isn't, and are partly funding her care, and the rest is being funded from her savings, which is odd because if she does have savings they should be being used to fully fund her care until they reduce to a certain amount, at which point the LA will fund it jointly with her income over £25 weekly.
However, I'm of the viewpoint that if you have assets to pay for care, they should be used rather than our already overstretched social care system having to pay out, and any attempts to avoid doing so are morally wrong.

And before anyone gets in their high horse at me, my MIL has recently gone into care, all her savings over the threshold have been used up on her care, subsidised by us so she has a slightly better room with an ensuite.

She can sell any time, that's nothing to do with the seven year rule.

The problem is DDoC which this seems a really clear case of, but you've got a decision that it's not, so your mum can get on with her plans sooner rather than later.

@Soontobe60 my mother lived 200 miles away. My grandmother was advancing in years and had recently had to stay with my mother for several months after having a fall and breaking her shoulder.

My grandmother refused to sell the farm so the deal was made that my mother would move up there to live with her but the farm would be signed over to my mother.

My grandmother has form for making grand promises, particularly financial, and my mother wanted to ensure that she wouldn't find herself out on her ear when my grandmother got out of the wrong side of bed or didn't agree with something my mother wanted to do.

When my grandmother went into a care home sometime later the situation was thoroughly investigated by the LA and no deprevation was found.

Everything has been done above board and approved by a solicitor and the LA. No attempt has been made to hide any assets or avoid self funding my grandmother's care.

If my mother had been told she needed to sell the farm and pay for the care I can assure you she would have done so.

We understand she can sell the farm any time she likes. Her concern is that she won't have enough money to buy a property back where she's from if she has a large iht bill due to the price differences where she is now and where she wants to move to.

If there are no other assets then there won't be any inheritance tax to pay.

@Namechangeforthiscancershit this is what I thought as the house is likely to sell for £200,000, if that, and there certainly isn't enough money in my grandmother's account to take the assets over the £325,000 threshold.

So did your mother sell her house to move in with your grandmother?

@Soontobe60 she was renting so she gave up her rented property.

If those are the only assets, your grandmother would also be entitled to the residence nil rate band so £475k total at the moment.

How long ago did your GM go into a care home. The 7 year clock for IHT will only have started from the point your gm left the property as until that point it was a gift with reservation of benefit. For IHT the farm will be valued at the date of the gift (or in your case when your grandmother stopped living there) and not what your mother sells it for.

If your grandmother's assets are less than £325,000 (potentially including value of your mum's house) then there won't be IHT to pay.

@SatansHelper thank you, that's very helpful to know.

It was about 4 and a half years ago DGM moved into a care home.

The house and farm was valued last year as a maximum of £250,000, but likely closer to £200,000 due to the poor state it's in.

My DGM certainly doesn't have enough money to take the estate over £325,000.