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Gift with Reservation Issue?
in Cutting Tax
15 replies 327 views
Scenario: Married couple with one child. Married couple's home is owned outright as Tenants-in-common. Two questions:
Firstly, on first death, the 'half' of the house owned by the deceased (or an equivalent portion up to the max IHT-free amount - 425k I believe?) is willed to the child. The house ownership remains as TiC but now between the child and the surviving spouse. The surviving spouse continues to live in the house. My assumption is that there is no gift-with-reservation issue because the property transferred has been willed rather than gifted, ie being dead, the former TiC owner cannot reserve any benefit from the transferred property! Is this correct?
Secondly, if the child decides to move into the house as their main residence, does the TiC ownership with their surviving parent have any tax implications, other than the usual IHT rules, either immediately or on subsequent death of the surviving parent (surviving parent's will leaves everything to child). ie, if surving parent's estate is less than £425k then no IHT is payable on second death. Is this correct?