Capital gains tax and probate question

[Linnet]

I have a couple of questions and I will be speaking to my solicitor about this as well but just wondered if anyone had any ideas of the answers now, as I’ll have to wait to hear from the solicitor.

First of all capital gains tax. How is this paid? The situation is that there is a property which I will inherit 1/4 share of in the future, at the moment the surviving spouse has a lifetime interest in it. Once they pass away the property should be sold and money divided up. I understand that CGT is the difference between what the property was worth at the time of my relatives death and what it’s worth when the surviving spouse dies, the property is sold and I inherit. If the property has increased in value and there is CGT to be paid how is it paid? Does it come out of the money from the sale of the house? Do I just receive my inheritance minus the CGT? Or do I have to come up with the money separately and pay it myself?

Secondly grant of probate. The property has a mortgage on it, I don’t know how much is outstanding on the mortgage and the surviving spouse is highly unlikely to share that information if asked.

The grant of probate says the estate is worth net £400,000. The solicitor has said that “this figure should include the estates interest in the property minus the share of the mortgage due from the estate but it’s possible that these figures are not accurate if the surviving spouse has not provided all the correct information”.

What does this mean? Does it mean If the house is worth £1m the outstanding mortgage is £600,000? And if sold for £1m and the mortgage paid off the £400,00 is what would be split between beneficiaries. Does it also mean they may have lied about how much the property is worth?

Also if a share of a property is held in trust for a beneficiary should the beneficiary receive some sort of paperwork to show a trust has been set up? Or is that not something that happens?

There is no contact between myself and the surviving spouse, by their choice, all contact is done through a solicitor.

thanks in advance

If I understand your post correctly, your share of the house is currently held in a life interest trust. If that is the case, your understanding of the CGT liability is wrong. Any assets owned by the life interest trust are revalued for CGT purposes on the death of the surviving spouse, so there is no gain or loss for the trustees at that point. If the property sells for more than the value given for probate, there may be CGT to pay. The trustees will be liable for this, not you. They should retain enough of the sale price to cover any CGT liability.

The grant of probate shows that the reported total value of the estate, including the house and all other assets, less the mortgage is £400k. That may not all be in the house. It could be that the deceased had other significant assets. Your solicitor is not suggesting that they have any evidence that the surviving spouse has lied. They are simply being cautious. The surviving spouse may, for example, have overlooked some of the debts that the estate owes.

A life interest trust is set up by the deceased's will. No other paperwork is needed to create the trust, although it should be documented on the title deeds for the property. The will, which you can get from the Probate Registry if you haven't already got a copy, should tell you everything you need to know about the trust.

Thank you @prh47bridge

The Will says that the share of the property belonging to my relative is to be held in trust for named beneficiaries and the surviving spouse has full use of the property until their death. The Will names the surviving spouse and a company as the trustees. But the surviving spouse had the company removed from being an executor/trustee 2 months after my relatives death and before they applied for probate which leaves them as the only trustee. The property has the name of the surviving spouse on the land registry but it does have a restriction on it which says

RESTRICTION: No disposition by a sole proprietor
of the registered estate (except a trust
corporation) under which capital money arises is to
be registered unless authorised by an order of the
court.

As the surviving spouse is the only trustee does this then mean that when they die their executors will organise the selling of the property and pay the CGT?

Yes, the executors should sort it out.

Thank you @prh47bridge