Would inheritance tax apply if you lived in home address all your life?

advice_please_2

InMyDreams wrote: »

If the son lives in the house with the father, the father can gift up to 50% of the house now and reservation of benefits wouldn't apply, so after 7 years there would be no IHT liability.

Not sure about deprivation of assets though. What happens if father goes into care? Would house then need to be sold anyway?

Thanks
Can you describe that in lamens term?

kingstreet

InMyDreams wrote: »

If the son lives in the house with the father, the father can gift up to 50% of the house now and reservation of benefits wouldn't apply, so after 7 years there would be no IHT liability.

Not sure about deprivation of assets though. What happens if father goes into care? Would house then need to be sold anyway?

Of course. I was thinking of the son taking full ownership and the father deriving a benefit, then it's a gift with reservation or falls foul of the Pre-Owned Assets "test".

There is also a potential deprivation of assets issue if the transaction can be viewed as an attempt to divest before a foreseeable need for care.

kingstreet

advice_please wrote: »

Thanks
Can you describe that in lamens term?

It becomes a Potentially Exempt Transfer;-

http://www.hmrc.gov.uk/manuals/ihtmanual/IHTM04057.htm

More here;-

http://www.inheritance-tax-online.co.uk/Exemptions_&_allowances_inheritance_tax.htm

dzug1

advice_please wrote: »

Also say that house is worth £360k and has cash, car etc. worth £40k
Total £400k
Is IHT 40% of £400k or £400-325 threshold (75k)

The second of these

But some or even all of the mother's IHT allowance may be available which could reduce IHT to nothing. Depends on who got her assets when she died.

advice_please_2

kingstreet wrote: »

It becomes a Potentially Exempt Transfer;-

http://www.hmrc.gov.uk/manuals/ihtmanual/IHTM04057.htm

More here;-

http://www.inheritance-tax-online.co.uk/Exemptions_&_allowances_inheritance_tax.htm

Thanks

Potentially Exempt Transfers (PETS)
Most gifts which are not exempt are usually Potentially Exempt Transfers (PETs) if made to an individual or certain types of trust. For the PET to become totally free of Inheritance Tax you would need to live for seven years after the date of the gift, and not retain any interest in the gift (i.e. you can not gift your house but continue to live in it, as this would be a Gift With Reservations)

This wouldn't apply as the father will still be living there
Will read up on gift with reservation

martindow

OP hasn't answered the question as to what happened when the mother died. If everything was left to her husband her IHT allowance will be available and IHT will not be paid unless the estate is greater than 650,000.

advice_please_2

This link I found good as a summary
https://www.gov.uk/inheritance-tax/inheritance-tax-planning-passing-on-property

Think it was mentioned above ie giving away 50%
.

Giving your home to your children and they move in with you
Inheritance Tax is still due if you do this as it’s counted as a ‘gift with reservation of benefit’.

If you just give half of your home to your children, they move in with you and you share bills, the half you give them isn’t part of your estate for Inheritance Tax purposes as long as you live for 7 years after giving it away

advice_please_2

martindow wrote: »

OP hasn't answered the question as to what happened when the mother died. If everything was left to her husband her IHT allowance will be available and IHT will not be paid unless the estate is greater than 650,000.

Apologies.
I can only assume this was passed on to husband
So if the house is worth £360k and it was joint ownership husband and wife 50% each.
So do you meant that total IHT allowance when dad passes away it will be double £325k allowance as includes someone else estate before?

Thanks for all the input. It's put things in motion in my head to pass on, mainly seek legal advice for them and there might be options

getmore4less

advice_please wrote: »

Thanks for all the input. It's put things in motion in my head to pass on, mainly seek legal advice for them and there might be options

have you actualy ask them if they need help or want you poking your nose into their financial affairs.

They may allready be fully conversant with IHT haveing had a death in the family allready where they would hve had to consider these issues.

advice_please_2

No they have asked, as they aren't very clued up on options, where to start and so I've started here to give me a bit of background advice which I have got from the kind people above posting and linking to things.