Giving house to daughter

grannyjo

we have built an extension and my daughter and son in law plus 3 children have moved into our house with husband and I in extension. They have just sold their house and we are giving our house to them. I am not going to live long and we are delighted they are willing to help us.
the house is now worth about £425 k. We will have a trust document to say we can always live there. I’m finding it very hard to work out inheritance tax for this. It seems that the threshold could go up to 500k rather than the 325k but  I can’t find anything definitive.
anyone had experience of this? - granny jo  

Mickey666

IHT will depend on the value of your total estate, not just the house,  but it seems unlikely there will be any liability.

Assuming the house is joint owned, on first death everything can be passed to surviving spouse with no IHT whatever the value.  The surviving spouse would also inherit £325k of the unused IHT allowance, giving them £650k before IHT is payable on their estate.  This alone seems likely to mean no IHT would be payable unless you have significant other assets in addition to the house.  In addition, if a house is left to a child there is an additional £175k allowance, making £500k per spouse or £1m in total.
Definitive info here: https://www.gov.uk/inheritance-tax

naedanger

Be careful about gifting the property with the provision that you can always live there. That can, I believe, make the tax position worse. I hope others who know more will advise in due course.

getmore4less

Lifetime interest in possession trust probably not necessary and don't think it have any tax advantages.

It won't be a gift to daughter, gift into the trust. 

As you are all living there might be options with outright gift/sale of 1/2 the house so you all have protected interest in the property. 

With the residential nil rate band if needed for IHT you introduce the downsizing rules if you dispose of part of it early, need to be careful not to lose that if it will be needed. 

Keep_pedalling

Sorry but giving your home away is never a good idea. There are no tax advantages to this, and your husband is putting his long term security at risk. 

What is the reasoning for this? If it is to avoid potential care cost then it will be treated as deliberate deprivation of assets so won’t work. 

You can always leave your share to your daughter with a lifetime trust for your husband. 

grannyjo

The daughter and son in law want to own a property. Not a promise in a will that could be changed, we won’t to be relieved of repairs etc

Aranyani

What if they split up?  What if they lose their jobs?  What if one becomes ill or disabled?  What if they need to move for work?

pattycake

So your daughter wants to own a property?  Lots of folk in the same position but they don’t expect their parents to give them their home!  What a terrible idea.  I love my kids to bits but I wouldn’t put my own future security on the line to satisfy their desire to own a house.

Mickey666

grannyjo said:

The daughter and son in law want to own a property. Not a promise in a will that could be changed, we won’t to be relieved of repairs etc

Hmm.  Why am I uncomfortable about that?  Don’t they trust you to leave the house to them in your wills?  In that case, can you trust them not to sell up and move somewhere else?  You may still have a right to live in the new property but you might not like it or the new area, possibly away from friends etc.
I get the desire to be relieved of repairs etc but how about they live in your house rent-free and look after any repairs etc in exchange for that amazing benefit?  That, with the promise of eventual ownership seems like a good deal to me.  

These sorts of arrangements require trust on both sides and this is starting to sound a bit one-sided - not a good recipe for harmonious living under a single roof, regardless of who owns it.

xylophone

If they want to own a property why don't they buy a proportion of yours so that you, spouse, daughter and SIL are tenants-in-common?

You/spouse can leave your interest to daughter with IPDI trust in favour of spouse.
In your position I'd be consulting a STEP solicitor about your wills and requesting daughter/SIL to do the same.

zagfles

Could also trigger pre-owned asset tax. Google it.