We recently acted on behalf of Executors who came to us after a lengthy litigation battle. They had defended the estate against a claim, and the legal costs had become enormous.
While the property’s value had increased over the years—which was some good news—it also meant a significant capital gains tax (CGT) bill. After carefully reviewing the details of the case and all financial aspects, we were able to use the legal costs as an allowable deduction against the gain. This saved our clients considerable money and provided a welcome piece of good news.
Understanding Capital Gains Tax in Probate
Capital gains tax is payable on the difference between the property value at the date of death and the date of sale, less any allowable expenses and the Estate’s annual allowance.
Strategies to Minimise Capital Gains Tax
One approach is appropriation of the property, which involves selling the asset on behalf of the beneficiaries. This can allow multiple beneficiaries to use their annual CGT exemptions, including spouses where applicable. This strategy is particularly effective if the beneficiaries are lower-rate taxpayers. The appropriation is carried out formally by deed.
Accurate probate valuations are essential. It’s recommended to obtain at least three valuations or a RICS valuation to ensure the correct value is recorded. If there is any doubt, it’s always best to seek legal advice.
Get Expert Advice
If you have questions about minimising capital gains tax during probate, or need guidance on valuations and estate matters, call us today on 01244 987419. Our Wills and Probate team can provide practical, expert advice to help you manage the financial aspects of probate efficiently.
