Estate (NSW) - distribution, sale or appropriation.

I'm a beneficiary of an Estate where the Will said to split things equally 4 ways. One of the other beneficiaries doesn't want a share of the holiday house, so we've agreed they can have cash instead, but the process & value has yet to be decided. We will be adjusting for likely CGT impost. It's less than a year since great-uncle died, and it was not his main residence, and it is post CGT.

As I understood it, options could be (maybe there are others?)
1. executors distribute house 3 ways & cash to the other beneficiary
2. executors sell house from estate to 3 of the beneficiaries & distribute the cash 4 ways
3. executors distribute house 4 ways and the exiting owner sells their 1/4 to the other 3 owners.

The solicitor has indicated that 'appropriation' will result in lower stamp duty payable by the Estate - I'm not clear which of the above is 'appropriation', as I understood stamp duty was just at nominal rates for a distribution in accordance with the Will.

Does anyone know what 'appropriation' is, and confirm about the stamp duty implications of the above (or any other options)?

 

appropriation is taking one asset to satisfy a gift, shuffling the will around. It can be done under the terms of the will, or via the trustee act.

Stamp duty will depend on the location of the property. There might be duty. CGT can generally be
avoided

 

Do the other 3 really want a 1/3 share each of a holiday house?

 

Thanks Terry.

The CGT I'm referring to is that already embedded - the asset value is higher than the cost, so if a beneficiary sells their share in the future (rather than thinking about the current transfers).

I just had a read of this article: Deceased Estates Duty Concession – New Revenue NSW Ruling

The article says "The duty concession only applies where the appropriation does not result in a beneficiary receiving more than their entitlement under the will. Revenue NSW considers any appropriation in excess is subject to ad valorem duty: section 63(2) of the DA (see example 6 of DUT 046)".

Does this suggest that adjusting for the embedded CGT (the exiting beneficiary gets less than 1/4 of the current value of the property to allow for the CGT they might otherwise incur, so the other beneficiaries get more than 1/4 of the current value) might jeopardise that exemption?

 

Yes they do! It will be rented out.

 

Adjusting ownership can trigger both duty and CGT - its as if a transfer is occuring. But a deed of family arrangement can get around the CGT. Duty is more tricky.

 

Generally 1, 2 and 3 will be given a concession for 3/4 of the duty and submit the will at time of transfer. They may need to arrange a loan to pay 4 if the estate doesnt have sufficient other assets. If the estate gives cash to 4 in place of property a tax adjustmnet may be needed since each of 1,2 and3 inherit the property and a tax laibility for unrealised CGT. Tax advice on the disposal for the 1/4 is needed and is likely exempt (for 4) where a sale occurs within 2 years of death. 1, 2 and 3 will have two elements to their costbase for their respective 1/3rd ownership.

Transfer costs paid by the executor (eg legal services, tax advice) may also be a element of their respective costbases

 

Thanks to both of you, it's been very helpful clarifying my thoughts.