Stamp on 50% inheritance buy out?

Talk to your probate solicitor about a Deed of Variation and/or see this helpful article >>> https://www.saga.co.uk/magazine/money/personal-finance/inheritance/deed-of-variation-changing-a-will-after-death

1. Excellent advice.
2. Make sure you and your wife have up to date Wills also. (There are an astonishing number of wealthy/IHT-liable folk without Wills)
3. Depending on how much £ is involved and how may be your respective wealth situations, explore grandchildren / nephew/niece trusts?
4. Forgive the obvious message: whoever you consult must know what they are talking about, don't go 'cheap and cheerful'.

The Saga article misses a very important point - a deed of variation is only effective for IHT and CGT if nothing is exchanged in return for your brother giving you or your wife his share in the property. If you remortgage the property and pay your brother after he has signed a deed of variation then you lose the IHT and CGT writing-back effect.

You will also end up paying SDLT anyway. The arrangement will be caught by S.75A Finance Act 2003, and SDLT will still be payable.

The only way you can acquire the whole property without paying SDLT is if your brother gives you his share, with no strings attached and without payment, and I assume that's not what's intended.

Reply to the comment left by Iain at 20/08/2019 - 13:51
I concur.

However, Victor did suggest making a gift to his brother as a Potentially Exempt Transfer after the transfer.

He would borrow the money to achieve this.

Providing the two transactions are unlinked and unconditional the problem is solved.

Any solicitor will point out the trust based risks of course. Victors brother could agree to the Deed of Variation and Victor could them change his mind out making the gift, and there is nothing that his brother could do about it.

This does happen!

Reply to the comment left by Mark Alexander at 20/08/2019 - 14:06
Yes, if the two "gifts" are unconditional and unlinked then that might work, if Victor's brother is happy to take the risk that he might never get paid for his half of the house (if Victor dies or goes bankrupt, for example, his brother would be up the creek, as it were).

However, I disagree that the problem is definitively solved, as that assumes that HMRC would unquestioningly accept the explanation. The very fact that there are two reciprocal "gifts" of equal amounts indicates an agreement between the parties. It is also quite clear that what is envisaged at the outset is a sale and purchase, not a gift; if viewed in isolation, could Victor's brother genuinely say that he is prepared to give his inheritance to Victor with no expectation that he would receive payment in return?

No, he couldn't. The reciprocal "gift" arrangement works on a nod-and-wink basis, which is a very poor foundation for any kind of tax planning as it quite clearly involves an attempt to deceive HMRC as to the nature of the transaction, which opens up several cans of worms and increases the possible penalties.

Yes, if Victor's brother genuinely wants to give his inheritance to Victor, and if Victor then entirely separately and without any forethought would later like to generously give cash to his brother then technically SDLT should not be payable. However, we all know that's not what's happening here.

Sadly were going through probate which involves a parental home. Although I too wanted to keep the house, the family decision was to sell the house. The proceeds would count as part of my late father's estate and then distributed after tax. Sadly my share could face IHT in the future on my death. To avoid this I plan to use deed of variance to hold my share in trust.