Gifting half my house to avoid IHT

Tom2023

I want to minimise the IHT that my kids have to pay when I die.

ATM my house is valued at around £500k so the liability is around £60k.

My youngest lives in the house. I don't actually live in it. I live with my new wife and am registered at her house.

Would gifting my youngest say half the house as a tenant in common mean no IHT would be libel on my new £250k estate?

Thanks in advance for any advice.

theartfullodger

(Obviously) whatever happens will depend on IHT (and possible CGT) rules WHEN YOU DIE - not what the rules now - and value when you die..  Given the state of this world-beating country people are expecting CGT & IHT rules to get tighter.. eg CGT allowance is I think being about halved from 6th April 2023.. 

Don't think this is a matter of libel.. perhaps you meant liable? 

How long have you not lived in it? There might also be CGT to pay on a transfer of ownership or part-ownership. 

Do you have an accountant? 

Tom2023

I lived in the house for 15 years but not for the last 7 years.

No I don't have an accountant.

I realise that gifts have to 7 years old to attract no IHT but was wondering how me retaining 50% of the house would affect things.

geordiejon

my aunt did this for my daughter and made up a trust so she will get 70% of the house when she dies.
i think the best thing you can do is spend money on talking to a solicitor about trusts and living trusts.

HappyHarry

You have a £325,000 Nil Rate Band and a £175,000 Residence Nil Rate Band totalling £500,000. So you can leave the house with no IHT liability.

Keep_pedalling

HappyHarry said:

You have a £325,000 Nil Rate Band and a £175,000 Residence Nil Rate Band totalling £500,000. So you can leave the house with no IHT liability.

Not on this house it is not his primary residency, and I doubt this is his only asset. 

As the OP has not liv3d in the house for 7 years then he likely to have an immediate CGT liability on the transfer.

Equalee

I dunno... sounds like your estate/ kids can afford to take the IHT hit.

Annisele

Tom2023 said:

Would gifting my youngest say half the house as a tenant in common mean no IHT would be libel on my new £250k estate?

There's just not enough information to say. Obviously we don't know when you're going to die or what the IHT rules will be then - but we also don't know what other assets you have. There's no need to list them here, but they're going to make a difference.

The only surefire way I know of to completely avoid IHT is to leave your entire estate to charity. But for most people, their true goal isn't "make my tax bill as small as possible", it's "allow my family to keep as much money as possible". Here, there's likely an interplay between IHT and CGT, in that you might do something that genuinely reduces your esate's IHT bill only to find that your CGT bill is higher than the IHT ever would have been. That's one of the many reasons why it's tricky to look at just one part somebody's tax position in isolation.

Also, you mention your "youngest" - which suggests you have other children. From a family relationships point of view, giving half a house to one of them (either before or after your death) might not be idea.

HappyHarry

Keep_pedalling said:

HappyHarry said:

You have a £325,000 Nil Rate Band and a £175,000 Residence Nil Rate Band totalling £500,000. So you can leave the house with no IHT liability.

Not on this house it is not his primary residency, and I doubt this is his only asset. 

As the OP has not liv3d in the house for 7 years then he likely to have an immediate CGT liability on the transfer.

I would never normally question you - your help on this forum is immense. However, are you sure it needs to be the OP’s primary residence at time of death? It has been the OP’s primary residence in the past. 

Many in care homes still qualify for the RNRB.

RAS

The house does not necessarily need to be the OP's current residence when they die to meet the requirements for IHT relief, but if they have an interest in the house they occupy..........

But since the OP hasn't lived in the house for the last 7 years, if he transfers half the house to his child, there may be an immediate CGT liability based on approx 40% of third of the increase in value since it was bought. 60 days to cough up.

So the OP needs specialist advice on the situation, looked at as a whole and holistically.

Keep_pedalling

HappyHarry said:

Keep_pedalling said:

HappyHarry said:

You have a £325,000 Nil Rate Band and a £175,000 Residence Nil Rate Band totalling £500,000. So you can leave the house with no IHT liability.

Not on this house it is not his primary residency, and I doubt this is his only asset. 

As the OP has not liv3d in the house for 7 years then he likely to have an immediate CGT liability on the transfer.

I would never normally question you - your help on this forum is immense. However, are you sure it needs to be the OP’s primary residence at time of death? It has been the OP’s primary residence in the past. 

Many in care homes still qualify for the RNRB.

I am happy to be corrected but as they moved out of the house prior to the introduction of the RNRB, I am fairly sure it does not qualify for the RNRB, but he should take professional advice on this.