Inheritance tax and renting

Bonesbrigaded

Hi there, from a long time lurker!

I have an elderly but healthy relative who is keen to work with me to avoid paying iht unfairly on their main home while continuing to live in it.

They are willing to give it to me and likely to live more than 7 years so potentially exempt transfer (pet) is an option.

However, they are asset rich but cash poor meaning paying rent on the whole property is not an option.

So we need another way to prove they are not getting unfair benefit from the house. One would be for them to move to the attic, me move in, and they just pay rent on the attic room.

However, it would be tricky as we don't get on all that well, the house isn't really set up for two, and id prefer not to live with them.

Two questions :

1. If I was given the house but didn't live there and rented the majority of the house out to a stranger at commercial rate, and my relative continued to live in the attic and paid me rent for the attic room, would that be enough to demonstrate they are not getting unfair benefit from it?

2. Any other ideas on how to enable transfer of family home through pet without living together?

Thanks very much in advance to you iht whizzes out there!

Bones

Vestra

Have you worked out what the potential IHT charge might even be? There is talk of the NRB changing also, is there a chance if it was to increase from £325k that this might cover the estate? Does the relative have any unused NRB from the death of a spouse?

getmore4less

Usual way to reduce the IHT liability is for them to use their assets if they are income poor and live a bit better.

Want to keep the house, they sell it to you, move somewhere cheaper and live off the spare income.

Keep_pedalling

If I were advising your relative, I would do everything I possibly could to stop him doing such an idiotic thing. You have said you don't actually get on with this person so why on earth should he risk poverty and homelessness buy putting his major asset in the hands of someone who if the relationship deteriates could evict them.

If he is happy living to live in his attic then he would be far better off selling the whole place buying a smaller place and enjoy the cash released from downsizing. Giving his house away would also mean he could not benefit from the Tories idiotic planned changes that will only increase the IHT threshold for property owners.

Bonesbrigaded

Thanks, yes we have looked into it, and it would still be above the threshold, with the iht a really significant sum. That's why we are taking it seriously.

Bonesbrigaded

And no, they haven't been married since since 20s

Bonesbrigaded

Yes moving somewhere else is an option, but they really like the house and would prefer to stay in it.

They have done up the attic specifically for downsizing so it isn't as bad as it sounds! They put in a kitchen bathroom and everything.

Bonesbrigaded

And, well, it is their choice but at the moment this is what they are considering. We've looked at lots of different options including selling, but they are not keen to either move or pay capital gains on the sale. As an added complication they are also subject to overseas tax law making a sale even less attractive.

Don't get me wrong, I'm really happy that they are continuing to consider this option for the benefit of everyone in the family and it isn't that we have a bad relationship, id just prefer not to live with them 24/7 if there is another way.

Bonesbrigaded

Does anybody know if the idea of me renting the house to a third party while they continue to live in it is workable?

Thanks for all the responses!

getmore4less

Bonesbrigaded wrote: »

pay capital gains on the sale. .

Why is there CGT on the place they live in?

getmore4less

Attic room is a long term liability for when they can't do stairs.

the house isn't really set up for two

Does that not rule out any form of sharing.