Property to be shared among siblings but one wants to own it.

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Horatio

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My Brother in Law's Brother's Wife's Family (still with me?) stand to inherit 2 properties in the coming years. There are 4 Siblings that stand to inherit equal shares each of the estate.

Parent Disponer to Children Beneficiary relationship

Property 1 is EUR250k.
Property 2 is EUR300k.

550k/4 shares = 137.5k value / share.
300k - 137.5k = 162.5k buyout cost.

Property 2 is of particular interest to one of the siblings in particular and she wants to own it eventually and is trying to model out the options for this such that everyone gets their cut while taking the most Tax efficient & legal route at the same time.

The obvious answer is that She buys out her siblings shares of property 2 after distribution is complete however this would saddle them with CGT bills assuming the property prise rises in the time between inheritance and sale. Also there are costs associated with the sale transaction itself.

Other models whereby the property is willed entirely to her are complex and subject to the Disponer and the other siblings buying in. The Disponer is open to discussion but it not that we'll informed on options or efficiencies that could be deployed.

Further models whereby she buys the property before death and distribution are also possible but the Disponer would be subject to an estimated CGT bill of approx 70k they think.

They're a decent bunch and seem to want to do right by each other and seemingly there is no competition among them to own Property 2.

Your collective intelligence on workable economic, compliant options would be great here.
 
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Horatio said:
Property 1 is EUR250k.
Property 2 is EUR300k.
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Keep things as simple as possible. Don't try to be too clever. Take your solicitor's advice on it.

The will should say something like the following

"Property 1 to be sold and the proceeds distributed between A&B in equal measure.

Property 2 to be left to C on condition that C pays D an amount equal to half the value of Property 2.

All other assets after paying the expenses to be distributed equally between A&B.
"

Assuming no other assets...
as of today's values, A& B would inherit €137,500 (550/4) if everything is divided in 4.
Under my proposal, A&B would inherit only €125,000 - so the difference is not huge in the scheme of things.

The siblings could have an understanding to balance things up between themselves.

The benefit of my proposal is that C only needs to deal with D and not with a committee. The parent should pick D as the one most easy to deal with and probably the one that least needs the cash urgently. So C could arrange to pay D over time if C did not have the cash available.

At those figures, there would be no CAT liability.

Brendan
 
Could you write the will to say all is divided 4 ways equally but C has the option of taking property 2 on the proviso that if the value of the property is greater than the 1/4 share then they must pay the difference to the other three and if less they get the property plus the difference. There’s only one transaction here.
 
I agree that you should keep it as simple as possible. Dont get bogged down in potential CGT. You have no idea if house price inflation is going to be so high that the price will go up significantly in a short period of time.

The actual value of the estate is to be split 4 ways. C wants to buy the house from the estate for market value. Thats fair and clean. Ask a solictor if this can be writen into the will
 
Brendan Burgess said:
The parent should pick D as the one most easy to deal with and probably the one that least needs the cash urgently.
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Brendan Burgess said:
At those figures, there would be no CAT liability.
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The original post doesn't clarify the relationship between the disponer and beneficiaries. There's no mention of a parent/child relationship. As such, we don't know what CAT group threshold(s) are relevant.
 
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Good point. I had assumed it was a parent, but it's probably an uncle or an aunt.

I don't think it changes the right strategy though. They will pay the same CAT whatever they do.

Maybe the adjustment between the siblings would be less CAT effective as they would have used up their Group B threshold.

Brendan
 
Horatio said:
however this would saddle them with CGT bills assuming the property prise rises in the time between inheritance and sale.
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Why should the prospect of the realisation of a capital gain immediately post-inheritance constitute a problem?
 
ClubMan said:
The original post doesn't clarify the relationship between the disponer and beneficiaries. There's no mention of a parent/child relationship. As such, we don't know what CAT group threshold(s) are relevant.
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Parent & Children x 4. Sorry should have mentioned this.
 
T McGibney said:
Why should the prospect of the realisation of a capital gain immediately post-inheritance constitute a problem?
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Because it's a taxable event whereas a simple Capital aquisition (within the limits) is not a taxable event. Not sure if I'm answering the question you're asking.
 
Horatio said:
Because it's a taxable event whereas a simple Capital aquisition (within the limits) is not a taxable event. Not sure if I'm answering the question you're asking.
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It's only a taxable event because you've made a gain in the meantime. If it's properly valued at the date of inheritance and disposed of as soon as practicable thereafter, there shouldn't be much of a gain anyway, but if there is, count it as a bonus.
 
With the estate worth €550k and each person getting €137,500, it's well below the CAT thresholds.

Make sure that the valuer as of the date of death does not undervalue the property. If they value the properties at €650k, you will still pay no CAT.

But if they value them at €450k and then they are sold for €550k, there will be CGT on the "increase" in value.

Brendan
 
Wouldn't it be simpler for the parent(s) to just leave the two properties to the 4 children and then let them sort things out? E.g. with regard to one of them buying the others out of their share in property 2 and maybe selling property 1. Rather than trying to micromanage what happens in that regard via a convoluted will?

What has the solicitor suggested?
 
ClubMan said:
Wouldn't it be simpler for the parent(s) to just leave the two properties to the 4 children and then let them sort things out?
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No, it's the very opposite.

It is much easier to get two people to agree than to get 4 people to agree.

They are all getting on well now, but who knows how they will be getting on by the time the parent dies? If A becomes difficult, that will be just B's problem and C, who wants the property won't be impacted.

And stipulating that the property is to be sold should be in every will. It stops arguments. For example, one of the children lives in the property and won't agree to the sale. If the will says it has to be sold, then they have to sell it.

Of course, if someone specifies that a property is to be sold and one of the children want it, they can try to buy out their siblings' interests in it.

Brendan
 
He is just getting into the loop now so no suggestion I've heard about.
 
Yes, I assume so.

If a property is left to Johnny and Mary jointly and they don't get on, then they will fight over it especially if Johnny is living in the property. It will be expensive and time-consuming for Mary to get an order to sell the property.

If the will says the property to be sold and the proceeds distributed between Mary and Johnny, then there will be much less scope for argument. Now if Johnny wants to stay in the house, he must agree with Mary that he buys the house from the Executor. It's a lot cleaner and leads to a lot less friction between siblings.

Brendan
 
Just to be clear, that's a different suggestion to your original one?

If so, which approach do you think is better, and why?
 
I was answering the general question and simplifying it leaving out the unnecessary complication like: My Brother in Law's Brother's Wife's Family (still with me?)

So in case it's still not clear...

1) The general principle is that a will should not leave a house to the children. It should specify that the house be sold and the proceeds distributed.

2) If the parent wants one of them to get the house, they should specify that in their will. "I leave Clubman my house" And then they can make some adjustment afterwards.

So applying these to the particular case

"Property 1 to be sold and the proceeds distributed between A&B in equal measure.

Property 2 to be left to C on condition that C pays D an amount equal to half the value of Property 2."

Brendan
 
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