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Inherited property transfer and promissory note query


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My brother and I are both executors and sole beneficiaries of our late mums estate. We would like to distribute the estate as simply as possible, but we're having difficulty finding clear answers that don't assume we are trying to achieve some form of tax evasion or ripping each other off. Any legal adviser to date is just creating work for themselves and leaving us more confused, which was the same as just before I decided to manage the probate process myself saving between £700 - £1000!

 

Mums estate is made up of a few hundred pounds (let's say £2k max) and her mortgage free home, recently valued by Esurv at £85k. Note: on the hmrc forms we estimated house value at £120k as there had been no similar house sales in the area for some time. There are debts to be paid from this before distribution.

 

We would like to distribute mums estate as follows:

 

1. Pay mums debts and all bills relating to mums estate and the upkeep since mums passing from the estate.

2. Transfer the house directly into my name with land registry. We have the physical deeds and mum is the registered owner with Land Registry.

 

I would then like to pay my brother the sum of £35k in 3 parts, which we think will be equal to 50% of the remainder of the value of mums estate. And is the sum agreed to given my input in the upkeep of the house since mums passing. This would be a payment from me and would be paid: £10k immediately and a promissory note/agreement to pay the remainder in two parts; £10k spring 2015 and the remainder by September 2015.

 

My brother is trying to help keep mums house in the family and wants to help me to achieve this. He does not need the cash in a lump sum and knows that, once I can achieve a high street mortgage next year, he will have access to any monies outstanding. At present I cannot access a mortgage as I have a 5.5yr old ccj for £252, I own my own business and will not have full two years of accounts until November 2014 and we have technically only 'owned' the house for less than a year as grant of probate was given in November 2013.

 

So, we need to know:

 

1. Can we do the transfer with Land Registry? If so, is there a place/formal way to set out why we are transferring to one and not both of the beneficiaries, which is acceptable, legal and binding? I understand that we must leave a clear trail not just for ourselves but for future owners/purchasers.

 

2. DIY Land Registry: As I successfully completed documents for the grant of probate we assume/have been advised that land registry assent/transfer would be achievable save for the part where the exchange is to one not both of the beneficiaries?

 

3. Conveyancing: Do we need to do this? It is likely that, should I need to take out a mortgage next year to fulfil my debt to my brother, I will need to through the conveyancing process at that time.

 

4. Can we use a promissory note to note the payment schedule to my brother?

 

5. Can we draft this promissory note ourselves and have it notarised by a solicitor?

 

6. Do we need more than one lawyer to achieve this? Some are saying 'yes' as I am executor, beneficiary and 'purchaser'.

 

I am hoping that someone out there can either provide or signpost us to a less biased responses to these queries and we can move forward at this painful time!

 

Many thanks in advance.

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My brother and I are both executors and sole beneficiaries of our late mums estate. We would like to distribute the estate as simply as possible, but we're having difficulty finding clear answers that don't assume we are trying to achieve some form of tax evasion or ripping each other off. Any legal adviser to date is just creating work for themselves and leaving us more confused, which was the same as just before I decided to manage the probate process myself saving between £700 - £1000!

 

Mums estate is made up of a few hundred pounds (let's say £2k max) and her mortgage free home, recently valued by Esurv at £85k. Note: on the hmrc forms we estimated house value at £120k as there had been no similar house sales in the area for some time. There are debts to be paid from this before distribution.

 

We would like to distribute mums estate as follows:

 

1. Pay mums debts and all bills relating to mums estate and the upkeep since mums passing from the estate.

2. Transfer the house directly into my name with land registry. We have the physical deeds and mum is the registered owner with Land Registry.

 

I would then like to pay my brother the sum of £35k in 3 parts, which we think will be equal to 50% of the remainder of the value of mums estate. And is the sum agreed to given my input in the upkeep of the house since mums passing. This would be a payment from me and would be paid: £10k immediately and a promissory note/agreement to pay the remainder in two parts; £10k spring 2015 and the remainder by September 2015.

 

My brother is trying to help keep mums house in the family and wants to help me to achieve this. He does not need the cash in a lump sum and knows that, once I can achieve a high street mortgage next year, he will have access to any monies outstanding. At present I cannot access a mortgage as I have a 5.5yr old ccj for £252, I own my own business and will not have full two years of accounts until November 2014 and we have technically only 'owned' the house for less than a year as grant of probate was given in November 2013.

 

So, we need to know:

 

1. Can we do the transfer with Land Registry? If so, is there a place/formal way to set out why we are transferring to one and not both of the beneficiaries, which is acceptable, legal and binding? I understand that we must leave a clear trail not just for ourselves but for future owners/purchasers.

 

2. DIY Land Registry: As I successfully completed documents for the grant of probate we assume/have been advised that land registry assent/transfer would be achievable save for the part where the exchange is to one not both of the beneficiaries?

 

3. Conveyancing: Do we need to do this? It is likely that, should I need to take out a mortgage next year to fulfil my debt to my brother, I will need to through the conveyancing process at that time.

 

4. Can we use a promissory note to note the payment schedule to my brother?

 

5. Can we draft this promissory note ourselves and have it notarised by a solicitor?

 

6. Do we need more than one lawyer to achieve this? Some are saying 'yes' as I am executor, beneficiary and 'purchaser'.

 

I am hoping that someone out there can either provide or signpost us to a less biased responses to these queries and we can move forward at this painful time!

 

Many thanks in advance.

 

I have an update to my query:

 

It would seem that we can assent the property to both beneficiaries and then do a transfer from the two of us into my name.

 

We can also, I've been advised, write a promisory note to my brother for £35k with a view to paying it off by a specified date.

 

I will be living in the house as my first and only home.

 

The valuation of the estate is below inheritance tax and it is costing more to clear the property (and make it safe) than the value of its contents I.e. 1t of coal in 30 yr old coal cellar! Derelict roof that we had to fix 'so we didn't get sued by the families of children using it as a adventure playground! It's a double garage and cost £2500!

 

So, really these are questions of tax on brothers £35k? And anything else I might be missing!

 

Again, any help greatly appreciated!

 

M

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Hello there.

 

I don't hold myself out as a legal or tax expert, but I'm wondering if you transferring money to your brother might count as a potentially exempt transfer [PET] for Inheritance Tax purposes. There may be no tax if you live long enough.

 

When you say you can assent the property, do you mean assign or is this something I haven't come across.

 

I think it could also be worth looking into a Deed of Variation on the will if it hasn't been through Probate. Only thoughts, as I say. This sounds complex and it may be that you need advice from a lawyer.

 

HB

Edited by honeybee13
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Hello there.

 

I don't hold myself out as a legal or tax expert, but I'm wondering if you transferring money to your brother might count as a potentially exempt transfer [PET] for Inheritance Tax purposes. There may be no tax if you live long enough.

 

When you say you can assent the property, do you mean assign or is this something I haven't come across.

 

I think it could also be worth looking into a Deed of Variation on the will if it hasn't been through Probate. Only thoughts, as I say. This sounds complex and it may be that you need advice from a lawyer.

 

HB

 

Hello Honeybee,

 

Thank you for taking time out for me.

 

It is a complicated one to some extent, but the facts are quite simple and it really is about not getting anyone, especially my brother into any trouble.

 

The plain truth is brother doesn't want the house and I can't get a mortgage, so brother wants to loan me the money to buy him out, which I will pay him back over a year period.

 

Land registry, though they can't give out legal advice, pointed out that they aren't bothered how we make our decisions. They simply need copy of probate and the assent form and transfer form. The assent form is changing from mum to two of us, as per mums will, and the transfer will show two people transferring to one. So long as they can see that probate has been granted they will take our instruction.

 

So it's the legality of brother loaning money to me that needs to be cleared up. It's my idea to use a promisory note, so his money is safe. I will look into PET.

 

Also, regarding conveyancing, this is down to me and at some stage i will need to go through this. The house in town, but is an old edwardian terrace in need of renovation. Mums owned it since the 60's so we definitely need to complete searches and be clear on boundaries.

 

Again, any further advice would be greatly appreciated.

 

Regards M

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1 + 2. Assuming this is registered land, I would just send the land registry the documents listed here: http://site.landregistry.gov.uk/public/faqs/as-personal-representative-or-executor,-can-i-transfer-to-a-third-party. I'm not a conveyancing guy but I'm not really seeing the problem with registering a property in different names to the beneficiaries - your arrangement does not sound too unusual and executors have to sell properties all the time (e.g. to pay off the deceased's debts).

 

I wouldn't be too concerned about leaving a clear paper trail. The idea behind the land registration system is that you a purchaser/lender is entitled to rely on what is stated on the land registry without needing to ask for any deeds and without having to go through boxes of historic paperwork.

 

3. I don't understand what you mean by 'conveyancing'. As of right now, you and your brother are both entitled to own half the property. Legally speaking, he is selling his share of the property to you. This is presumably dealt with on the TR1 form.

 

4. Yes, it would be sensible to record the arrangement in a written document. To my mind this is really a simple Sale and Purchase Agreement rather than a promissory note, since he is selling you his right to a share of the house and you are promising to pay him for it.

 

5. It would be wise to have a solicitor look over the document (or even draft it ... it would just be a simple sale and purchase agreement for an interest in a property, with no warranties). Notarisation is not necessary - unlike many other countries, notaries do not have any real role in the conveyancing process in the UK.

 

6. Surely not. Employing multiple lawyers for something like this would be a bit silly. There is in theory a conflict of interest between you and your brother but I can't see a problem as long as both sides consent.

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1 + 2. Assuming this is registered land, I would just send the land registry the documents listed here: http://site.landregistry.gov.uk/public/faqs/as-personal-representative-or-executor,-can-i-transfer-to-a-third-party. I'm not a conveyancing guy but I'm not really seeing the problem with registering a property in different names to the beneficiaries - your arrangement does not sound too unusual and executors have to sell properties all the time (e.g. to pay off the deceased's debts).

 

I wouldn't be too concerned about leaving a clear paper trail. The idea behind the land registration system is that you a purchaser/lender is entitled to rely on what is stated on the land registry without needing to ask for any deeds and without having to go through boxes of historic paperwork.

 

3. I don't understand what you mean by 'conveyancing'. As of right now, you and your brother are both entitled to own half the property. Legally speaking, he is selling his share of the property to you. This is presumably dealt with on the TR1 form.

 

4. Yes, it would be sensible to record the arrangement in a written document. To my mind this is really a simple Sale and Purchase Agreement rather than a promissory note, since he is selling you his right to a share of the house and you are promising to pay him for it.

 

5. It would be wise to have a solicitor look over the document (or even draft it ... it would just be a simple sale and purchase agreement for an interest in a property, with no warranties). Notarisation is not necessary - unlike many other countries, notaries do not have any real role in the conveyancing process in the UK.

 

6. Surely not. Employing multiple lawyers for something like this would be a bit silly. There is in theory a conflict of interest between you and your brother but I can't see a problem as long as both sides consent.

 

Thank you so much for your time and clear responses. It is a very painful time for us and so far we have only found people who want to further confuse the situation. Last law firm insisted that I get a second lawyer as no matter what we're saying this is deemed a mortgage and we will definitely need to use two lawyers! The more I research, the more their reasoning fails. It is legal advice that scared me about taxes etc, but as you can see, we don't meet thresholds and it will be and remain home!

 

You are very kind. I will look into a sale and purchase agreement. Let's see how complicated they can make it?

 

Regards

 

M

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He is effectively selling his share of the property to you, which is in theory subject to capital gains tax, but I believe CGT should only apply to any increase in value between the time of death and the current time.

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He is effectively selling his share of the property to you, which is in theory subject to capital gains tax, but I believe CGT should only apply to any increase in value between the time of death and the current time.

 

Not finding a simple sale purchase re property without involving conveyancing! Perhaps I will try legal advice again, equipped with some sound advice from you guys, and who knows, they may make it a little simpler.

 

In the meantime, if anyone has a sample of such a document or can point me in the right direction, that would help hugely. We will sign in front of a lawyer, but we feel we can sort the land registry forms ourselves and probably a simple sale/purchase agreement.

 

Many thanks M

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Conveyancing is basically just the word for doing a sale of property. This is actually simpler than a normal conveyancing, because there is no need to have a separate contract (normally house sales are done using what is known as the Standard Conditions of Sale (fifth edition)).

 

To be honest, after reconsidering I don't think you need a separate agreement at all. It seems to me that this can all be dealt with on the land registry forms (which are also contracts - have a look at the forms and you will see what I mean.

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