inheritance tax

exbankchick

As a single parent with a house that peaked at possibly 500,000 (tho' now probably 350,000) & an only daughter, would it make sense for me to gift her half the house & hope to live another seven years? I would also insist she set up a pre-nuptial agreement before marriage, tho' would this be any safeguard at all? Thanku
I'll revise my question! As a single parent with a house that peaked at possibly 500.000 (tho' now probably 350,000) & an only child, is there any way I can minimize her inheritance tax?

noh

Makes no sense at all. Far too many potential pitfalls
What are you trying to acheive?

the_rottweiler

look into being joint tenants in common, then she owns half the house and i dont think the 7 year rule comes into it, (please feel free to correct me anyone)

as for a pre-nup i dont think that they are legal in the UK

CLAPTON

if you gift her half the house then she will potentially be liable to pay CGT on her half (assuming it wouldn't be her principle private residence) and if you continue living in it without paying rent to her then it will be ineffective for IHT avoidance so she may end up paying IHT and CGT

if she marries and dies before you, her half will become her husband's property etc
if she gets into debt then her creditor could put a charge on your house.



a great number of pitfalls

how old are you
what is your general health like
how old is the daughter?

CLAPTON

the_rottweiler wrote: »

look into being joint tenants in common, then she owns half the house and i dont think the 7 year rule comes into it, (please feel free to correct me anyone)

as for a pre-nup i dont think that they are legal in the UK

the 7 year rule applies to gifts... giving someone half a house is indeed a gift.

sloughflint

CLAPTON wrote: »

the 7 year rule applies to gifts... giving someone half a house is indeed a gift.

In any event,I think is that as Op would continue to benefit ( living there) from the gift there'd be no IHT saving even beyond 7 years.

Gifts that you continue to benefit from. If you give your home to your children with conditions attached to it, or if you continue to benefit from the home yourself, this is known as a ‘gift with reservation of benefit’ and the gift won't be exempt from Inheritance Tax, even if you live for seven years afterwards.

http://www.hmrc.gov.uk/inheritancetax/pass-money-property/pass-home-to-children.htm

dunstonh

the 7 year rule applies to gifts... giving someone half a house is indeed a gift.

It is but if she continues to live in it then the OP is still getting benefit from it (assuming market rent isnt paid). In which case its a gift with reservation and the 7 year rule doesnt apply.

And, as you correctly, say, not only that they can get the daughter for CGT (assuming she doenst live there) as well as IHT.

exbankchick

noh wrote: »

Makes no sense at all. Far too many potential pitfalls
What are you trying to acheive?

Saving my daughter inheritance tax

exbankchick

CLAPTON wrote: »

if you gift her half the house then she will potentially be liable to pay CGT on her half (assuming it wouldn't be her principle private residence) and if you continue living in it without paying rent to her then it will be ineffective for IHT avoidance so she may end up paying IHT and CGT

if she marries and dies before you, her half will become her husband's property etc
if she gets into debt then her creditor could put a charge on your house.



a great number of pitfalls

how old are you
what is your general health like
how old is the daughter?

65
good
27

Errata

Pre-nuptial agreements have no legal standing in the UK, although a judge in a good mood on a good day at divorce time might pay a little attention to one.

noh

exbankchick wrote: »

Saving my daughter inheritance tax

It's the estate that pays IHT not the benificary.
In my opinion the best way to avoid IHT is to spend the excess over the threshold and enjoy yourself. You've got another 20-25 years to go yet you may well need the money yourself.

Nigel