IHT 7-Year Rule Property Split

jackdoor

edit......

home_alone

Have a look at the "cutting tax" threads there is a lot on IHT.

gary

EdInvestor

AFAIK this idea won't work as it will come under the 'gift with reservation of benefit' rules. Suggest you consult your solicitor.

Note that if she eventually needs long term care but a child over 60 (you?) is living in the home, the council will leave it alone.

EdInvestor

AFAIK to avoid the gift with reservation problem, she would need to pay you rent for your half and you would need to declare the rent as income and pay tax on it.

nickelodeon

It is not a gift with reservation, as you are also living there and contributing towards outgoings, you both own a half and both live there so she does not have to pay you rent. I think you are right, it is a PET.
For her to give you half of the property she would have to transfer it to you, it needs to be done officially using a Transfer which is signed and witnessed by both of you, you can't just write a letter gifting half the property, it would not have any legal effect. The Transfer will then need to be lodged at the Land Registry (presuming the property is registered - if not it will need to be registered). You need to get a solicitor to do this because of the legal implications. As far as I'm aware the 7 year period would start from the date of the Transfer, which is usually the date you both sign it.

Bossyboots

You do not need a solicitor to do this. The form can be downloaded from the land registry website.

It is your choice whether you think you know enough about what you are doing not to take legal advice.

You could take some advice and then do the form yourselves which would certainly save money but again, this is your choice whether you do so or not.

Bossyboots

It is the TR1. You will be transferring the whole property from your mum to both of you.

EdInvestor

Finally tracked down a reference to this.

Joint ownership and joint occupation

If a child is still living at home a share in the property may be gifted and, provided the joint owners meet their respective shares of the running costs thereafter, this will be a potentially exempt transfer ("PET"), not a gift subject to reservation of benefit. However, there is a pitfall if the child leaves home during the donor"s lifetime. In that case there is a resumption of benefit.

Looks like the exception that proves the rule

paragp

EdInvestor wrote:

Finally tracked down a reference to this.




Looks like the exception that proves the rule

does this mean that if i am living with my mum and we share the cost of running the house, but the house is currently solely in her name, I would not be liable for IHT? Does she have to transfer half the house in my name?

EdInvestor

No, it means that if she did transfer half to your name and then lived for another 7 years, it would not be liable for IHT. (BTW the IHT free allowance is 300k from April).

paragp

EdInvestor wrote:

No, it means that if she did transfer half to your name and then lived for another 7 years, it would not be liable for IHT. (BTW the IHT free allowance is 300k from April).

i am guessing it would be half that she transfered over to my name will not be liable for IHT , but he other half in her name would still be liable for IHT.

is this correct?