Minimising tax on inherited property

[Tone]

Hi Guys,

I'm going to speak with my accountant but thought id post here firstly.

I want to avoid or reduce the stamp duty and CGT (if applicable).

Basically a trustee / executor of an estate is currently on title and transferring 2/3 share to myself and another beneficiary of the estate. So the three of us hold equal shares. At some stage the original person on title will pass on and the ownership will fall back to myself and the other beneficiary.

Questions.

1. Do we have to pay stamp duty ? Now and later?
2. Does CGT apply if we sell? Or does it only apply on the $ difference between the valuation taken place during the transfer and the sold price?
3. What if we sell to fund a new property - is stamp duty avoidable?

Basically Im trying to look into the future and minimize tax any liabilities.

Cheers

Tone

 

[Terry_w]

Hi Guys,

I'm going to speak with my accountant but thought id post here firstly.

I want to avoid or reduce the stamp duty and CGT (if applicable).

Basically a trustee / executor of an estate is currently on title and transferring 2/3 share to myself and another beneficiary of the estate. So the three of us hold equal shares. At some stage the original person on title will pass on and the ownership will fall back to myself and the other beneficiary.

Questions.

1. Do we have to pay stamp duty ? Now and later?
2. Does CGT apply if we sell? Or does it only apply on the $ difference between the valuation taken place during the transfer and the sold price?
3. What if we sell to fund a new property - is stamp duty avoidable?

Basically Im trying to look into the future and minimize tax any liabilities.

Cheers

Tone

You need to speak to a lawyer also. Has the person died yet? You seem to contradit yourself above.

There is no stamp duty or CGT on the transfer from the executor to yourself. If you subsequently sell or transfer then there will be. CGT may be payable depending on the use of the property by yourself and by the deceased.

If you intend to do a transfer from the other beneficiary then there may be ways to do it now to avoid both CGT and stamp duty. But this will depend on a few things.

 

[Terry_w]

BTW there is no stamp duty on the sale of a property, only on a purchase.

 

[Paul@PFI]

1. As Terry has indicated the transfer of title from the deceased name to that of the estate beneficiaries is not dutiable. Inheritance doesnt trigger duty in most cases. There is a small admin fee imposed by land titles though.

2. Yes - Maybe !! The beneficiaries will inherit the acquisition date and cost-base of the property from the previous owner if the property is a post-CGT asset. If it is a pre-CGT asset then the value inherited in the market value on the date of death. So you acquire that persons CGT liability for post - CGT assets and you inherit the property and market value if its a pre-CGT asset.

If the asset is sold by the three owners more than two years after death additional CGT may be liable if the property changes in value between the date of death and date the sale contract is made. The strategy involved requires you all to consider if the value will rise to your mutual benefit. If not? Sell it.

Have you sought advice on the alternative scenario? That is no beneficiary inherits any property. The executor sells the property instead and splits the cash instead of dumping three people with a property. That may give certainty to CGT and leave three people to choose to do what they want with their share of the $$$ after selling costs. Leaving a property can be contentious. One may want to spend $$ on renovation and others two dont. One may want to borrow against it - Guarantee others wont want them to. etc etc. One of three may want to be the buyer ? That could avoid agent fees and could also be split three ways.

In my experience I would encourage all beneficiaries to meet with executor and discuss options with a solicitor who can guide on the formalities and legal issues.