Help me understand a deed of appropriation

[SwanFlight]

If you are due a property has been willed to three family members - and it was valued at £350k at date of death, then a year later sells for 400k. There's a potential CGT for the estate to pay on the 50k difference. Is it worth doing a deed of appropriation in these circumstances? I know there's loads of variables here like individual annual allowances and such. But if any one can spell this out (pros and cons) in plain speak please do.

If the property has already been sold, it is too late for a deed of appropriation. A deed of appropriation must be signed and dated before the property is sold. Had this been done, it would have allowed the property to be sold on behalf of the beneficiaries rather than the estate. This can reduce the tax to be paid if there are multiple beneficiaries as their individual annual tax-free allowances can be used. Also, if any of them is a basic rate taxpayer, they will pay CGT at a lower rate than would apply for the estate.

Not heard of this before, is it applicable in England?

Yes.

The house isn't sold yet. It's in the conveyancing period.

So my rough calcs is the estate pays 50k - 3k (allowance for the estate), leaves 47k taxed at 24% high rate = 11.28k Tax. Vs 50k - 3 x 3k (allowance for three beneficiaries) is leaving a taxable 41k giving 9.84k tax (if beneficiaries are charged at the high rate) or 7.38k at basic rate. This is my rough calculation under the assumption that the beneficiaries have no other capital gains tax for the period. So I'm reading a possible saving of 3.9k if going the deed of appropriation route. So the individuals will gain an extra 1.3k potentially. Is that right? Is this worth the potential additional solicitor fees and or any risks for the estate / beneficiaries?

Is this an easy normal thing to happen with conveyancing? Does this cause further aggravation for beneficiaries?

This is my rough: back of a postcard calculation, and I might have interpreted it totally wrong, if so please correct me!

I'm under the assumption here also that the estate pays at the higher rate, have no idea why as there is no income on the estate for that period. So not sure which rate they would pay?

I agree with your calculations. However, it is easy to get this wrong, so you must take legal advice. You therefore need to deduct legal fees from the possible saving. You also need to check that all the beneficiaries are basic rate taxpayers.

Regarding the sale. If you have it valued at £350k and it sells at £400k, of course you will have other expenses such as an estate agent, and conveyancing fees. Do you work out the CGT after those deductions?

Yes, the costs of selling the property are allowable expenses which can be deducted from the profit.