IHT Query Regarding Property

GDB2222

getmore4less said:

As the gifts are to residents there is no reservation of interest if the proportion of the property gifted is proportional to the occupation.

I did wonder about that, but what happens when they move out?

se_yp

Thank you all for the input. much appreciated.

GDB2222 said:

getmore4less said:

As the gifts are to residents there is no reservation of interest if the proportion of the property gifted is proportional to the occupation.

I did wonder about that, but what happens when they move out?

Precisely our thoughts. The gifts are being handed to the children who will continue to live there and assuming they are all contributing towards upkeep of the house and bills etc (perhaps splitting equally 3 ways) then I would have thought gift with reservation doesn't apply.

If the 2 children move out before the 7 years however that i understand brings about some complication. I should add that this is just the 1st step in the IHT planning process. The next step will likely be the "big one" where she decides whether to sell and downsize, convert the home into a HMO, take on a lodger or something of the sorts. 

theoretica

se_yp said:

Thank you all for the input. much appreciated.

GDB2222 said:

getmore4less said:

As the gifts are to residents there is no reservation of interest if the proportion of the property gifted is proportional to the occupation.

I did wonder about that, but what happens when they move out?

Precisely our thoughts. The gifts are being handed to the children who will continue to live there and assuming they are all contributing towards upkeep of the house and bills etc (perhaps splitting equally 3 ways) then I would have thought gift with reservation doesn't apply.

If the 2 children move out before the 7 years however that i understand brings about some complication. I should add that this is just the 1st step in the IHT planning process. The next step will likely be the "big one" where she decides whether to sell and downsize, convert the home into a HMO, take on a lodger or something of the sorts. 

If she - as only a 1/3 owner of the property - would still have the majority of decision making on whether to sell/HMO etc then that would be an argument that gift with reservation would apply.

se_yp

Once house is split (most likely equally), it would be joint decisions on everything related to it.

RogerPensionGuy

Nice thread. 

Hopefully I can ask a little question on here as I have not found the answer easily yet. 

Say parents(A) own a house and pass on, their estate has an IHT zero rate of 1 million if the house is given to kids or grandchildren, that's as I understand it. 1 million was their total estate for info. 

But parents B sold the old large family home and decided to rent a flat due lifestyle/whatever and passed on say a few years later, this estate left also 1 million, but no property obviously involved and all estate to children or grandchildren. 

So parents B estate of 1 million is 650K IHT zero rate and 350K pays tax at 40%

If all the above is correct as I understand it, why is there such a different treatment for house owners or house renters? 

GDB2222

RogerPensionGuy said:

Nice thread. 

Hopefully I can ask a little question on here as I have not found the answer easily yet. 

Say parents(A) own a house and pass on, their estate has an IHT zero rate of 1 million if the house is given to kids or grandchildren, that's as I understand it. 1 million was their total estate for info. 

But parents B sold the old large family home and decided to rent a flat due lifestyle/whatever and passed on say a few years later, this estate left also 1 million, but no property obviously involved and all estate to children or grandchildren. 

So parents B estate of 1 million is 650K IHT zero rate and 350K pays tax at 40%

If all the above is correct as I understand it, why is there such a different treatment for house owners or house renters? 

There was a palaver about people paying IHT on the family home, and the politicians made this complicated arrangement, rather than simply raising the nil rate band from £325k to £500k. 

Savvy_Sue

GDB2222 said:

RogerPensionGuy said:

Nice thread. 

Hopefully I can ask a little question on here as I have not found the answer easily yet. 

Say parents(A) own a house and pass on, their estate has an IHT zero rate of 1 million if the house is given to kids or grandchildren, that's as I understand it. 1 million was their total estate for info. 

But parents B sold the old large family home and decided to rent a flat due lifestyle/whatever and passed on say a few years later, this estate left also 1 million, but no property obviously involved and all estate to children or grandchildren. 

So parents B estate of 1 million is 650K IHT zero rate and 350K pays tax at 40%

If all the above is correct as I understand it, why is there such a different treatment for house owners or house renters? 

There was a palaver about people paying IHT on the family home, and the politicians made this complicated arrangement, rather than simply raising the nil rate band from £325k to £500k. 

And there are downsizing arrangements - so yes, if you've rented all your life, your IHT-free estate will be smaller, BUT if you've sold the family home within I'm-not-quite-sure-what-timescale then you can still make use of the exemption for passing on to direct descendants.