Best option to split inheritance 3 ways

Discussion in 'Accounting & Tax' started by PJ1, 11th Jul, 2018.

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  1. PJ1

    PJ1 Well-Known Member

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    Hello PC,
    I have had the misfortune to be the executor of my father's estate.
    The estate consists of two properties to share between his three children.

    The plan was to total up the value of each property and split that figure equally between all three of us, not worrying too much about any difference in the value of one property over the other. My sister has been living in one of these houses for many years and we would all like her to keep this house. Therefore we have one house to sell and my sister would buy the remaining shares of her house from my brother and myself. We all get along well and have no arguments over money.

    If my sister takes one property which she will need to take out a loan to pay us the difference would she be required to pay stamp duty on this transfer since she inherited 1/3 and is buying the remaining 2/3rds? Are there any other pitfalls to this idea?
    Thank You
     
  2. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    You all should get some legal advice. it may be possible to do this without stamp duty and without CGT being triggered - which would happen if she buys it from the estate.
     
  3. Scott No Mates

    Scott No Mates Well-Known Member

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    Consider the way the will has been written - assuming that the properties are worth the same amount, is it possible to consider that she may receive ⅔ the value of the property she is living in and only purchase the remaining ⅓? You may need a valuation to determine the amount for stamp duty.

    Is she able to borrow this amount? (or are you & your other sibling in position to loan her some or all of the balance)?

    As @Terry_w points out, consult a solicitor for guidance.
     
  4. hammer

    hammer Well-Known Member

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    I'm doing something vaguely similar with my sister right now. Legal advice really makes a huge difference here.....not because of lack of trust, but because transfering property and dealing with banks can be really quite tricky.

    We had no option but to use a solicitor in order to get the transfer across the line.

    It'll be the best few thousand you ever spend. Do it.
     
  5. PJ1

    PJ1 Well-Known Member

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    Thanks guys.
    I dont think CGT will be applicable as one property was purchased in the 70's the other was his ppor. We have a solicitor handling the estate but they aren't very forthcoming with advice. The other thing is I have never dealt with this situation previously and dont always know the questions to ask.
    I have expressed our wishes as above and asked them how we should approach things tax and but they seem to just want to finalize the process as quickly possible. I dont have a lot of confidence they will do the right thing for us. An example is they dont know how to transfer his shares into my online trading account as they have never dealt with anyone who doesn't have a broker. I'm struggling here...
     
  6. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Prob no CGT in that case

    Ask the lawyer who to rejigg the estate so the sister takes the property and the other 2 the rest. If they resist seek legal advice elsewhere. You might need a deed of family arrangement.
     
    Scott No Mates likes this.
  7. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    All deceased assets should be valued competently and any historical CGT liability determined and estimated at the date of death as the NET estate value needs to be considered in the estate distribution/s which may need to be equal (or agreed to be equal even if minor disparity is evident) to avoid later legal issues. Otherwise, you could end up distributing a CGT exempt asset to one beneficiary and a substantial CGT liability attached to property to another. Sometimes these issues preclude easy transfer of assets and sale may be easier. You need to each ask - Is this a property I would otherwise buy at market value ?? and Is this as asset I want to jointly own with others ? If not the sale route may be far easier.

    One of the problems with inheritance of property is positive gearing where if you receive cash you can choose to invest elsewhere, repay debt etc and also choose some gearing etc. Just because a property is available in an inheritance does not make it a great investment. The emotional ties should be set aside.

    The solicitor should know that and have already advised on the tax issues. Ask questions and if they dont understand the concept find a solicitor who is competent.

    The issue of then settling up each parties entitlements so that one could buy from the other/s etc may follow and be a separate issue which can sometimes be done at the same time and access some limited duty concessions.