OK need some legal/financial advice

My Father in Law has a large inheritance from his mother which me wants to share between his 3 daughters. The estate is in the process of splitting everything between Him and his Sister and paying the inheritance tax that is due.

As said he wants to split this between his three daughters, but the question is would these transfers be liable for Capital Gains Tax which would mean the Tax man getting a second bite at the money. I suspect it would be as they are essentially 2 different actions.

If it is subject to CGT is there any ways to offset or reduce the liability?

I can't see that CGT would be relevant, unless you are talking about a transfer of a capital asset and the gain in that asset when and if the daughters get round to selling it.

But in any event this may not be the best way to do it as there are other things to consider (such as if your father in law dies within 7 years, it will fall back within his estate for inheritance tax purposes so could be taxed again in those circumstances). It may be that the wisest thing would be to do a deed of variation changing the Will so that the daughters get the inheritance directly rather than from him. Your Father in Law would be wise to get specialist advice.

If you're passing cash over then there's no CGT. If it's say a property or other assets, then his cost is the probate value. Any increase in value between probate and transfer could potentially be liable to CGT depending on the asset itself e.g. if it was a rental property that still had a tenant.

As Mark said IHT would be a huge concern and it'd be better to vary the will. You need to summarise the assets and speak to a solicitor and an accountant if it's not just cash to ensure you don't fall foul of any rules.

The transfer between father and daughters will be cash only. IHT will still be due on the original inheritance value anyway so what would the benefit be changing the will unless you mean the IHT due should the father die within 7 years.

It may be too late to change the will as its been 6 months since the grandmother died. I assume there must be some point at which its no longer possible.

Yes, one of the issues would be if father in law dies within 7 years of making the "gift". It is then treated as if he still owned it and if his estate is over the IHT 0% rate allowance it is another 40% hit on that excess.

From shouting across the room to my resident expert, I now know you have 2 years to do a deed of variation to avoid this future tax risk.