Selling home and moving in with child

SarJoE

I am thinking of selling my home, owned-outright with my deceased husband(now mine), and moving in with my daughter and her teenage family.  I think Ill get about 700k for my property and plan to pay my daughter some form of rent.  I'm of good health and active, but aware that any money given to family is subject to inheritance tax when I pass.  Hows best to move the money from the sale of the house around to avoid this in the future?

Keep_pedalling

Unless you have assets in excess of £1M your estate is unlikely to be subject to IHT, and even if your total assets exceed that gifting does not increase the amount of IHT that you estate may have to pay. For your own security you should retain sufficient funds to secure alternative accommodation if the living arrangements don’t work out and make sure that should you ever need residential care in the longer term you still have the means to self fund it.

Albermarle

 but aware that any money given to family is subject to inheritance tax when I pass. 

A very widespread misconception, spread largely by very poor reporting of IHT issues in the media.

Lets say you have enough assets when you die that your estate has to pay inheritance tax.

Lets say you give a family member £100K whilst still alive.

If you die 7 years after making the gift this £100K will not be counted in your estate for IHT calculations. If you die within 7 years, it will be counted in so you ( or your estate to be precise) will be back where you started. You can not incur more IHT by giving money away, only less or the same.

Of course as the previous poster said if your estate is not big enough to pay IHT, then giving money away can not incur it in some way.

Albermarle

Keep_pedalling said:

Unless you have assets in excess of £1M your estate is unlikely to be subject to IHT, and even if your total assets exceed that gifting does not increase the amount of IHT that you estate may have to pay. For your own security you should retain sufficient funds to secure alternative accommodation if the living arrangements don’t work out and make sure that should you ever need residential care in the longer term you still have the means to self fund it.

As the OP is planning to sell her house rather than pass it on to her children in her will, will she still be able to have £1M before paying IHT, or just £650K ?

Keep_pedalling

Albermarle said:

Keep_pedalling said:

Unless you have assets in excess of £1M your estate is unlikely to be subject to IHT, and even if your total assets exceed that gifting does not increase the amount of IHT that you estate may have to pay. For your own security you should retain sufficient funds to secure alternative accommodation if the living arrangements don’t work out and make sure that should you ever need residential care in the longer term you still have the means to self fund it.

As the OP is planning to sell her house rather than pass it on to her children in her will, will she still be able to have £1M before paying IHT, or just £650K ?

Yes, the RNRB and transferable NRB can still be claimed under the downsizing rule. 

MarzipanCrumble

Why not try a month living with your daughter before you commit?

Albermarle

Keep_pedalling said:

Albermarle said:

Keep_pedalling said:

Unless you have assets in excess of £1M your estate is unlikely to be subject to IHT, and even if your total assets exceed that gifting does not increase the amount of IHT that you estate may have to pay. For your own security you should retain sufficient funds to secure alternative accommodation if the living arrangements don’t work out and make sure that should you ever need residential care in the longer term you still have the means to self fund it.

As the OP is planning to sell her house rather than pass it on to her children in her will, will she still be able to have £1M before paying IHT, or just £650K ?

Yes, the RNRB and transferable NRB can still be claimed under the downsizing rule. 

Probably worth noting there may be some changes to IHT in the coming Budget. I suspect it might be something around simplification rather than anything else.

Savvy_Sue

MarzipanCrumble said:

Why not try a month living with your daughter before you commit?

I think that's excellent advice ... 

Also consider how future proof such a move might be. 

Would you each be able to maintain privacy? Is there a son-in -law or partner to consider? 

Is it still in the same general area (so you can keep your existing friends?) If something catastrophic happens (broken limb?), will you still be able to get around the house? If you had to give up driving, would you still be able to get to the shops / buses / station? 

Do your grandchildren like you, and vice versa, and engage with you as much as teenagers do? Do they indulge their tastes in music at full volume, and can you cope with that? 

One of my siblings moved into a house which they converted / renovated to include a granny flat for MIL. AFAIK that's worked well: the children were quite small then, and have now left home. But MIL is now more frail, has had a couple of falls and doesn't recover quickly from any setback like a chest infection or Covid, which means an increasing need to look out for her, just as my sibling might be ready to think about retiring. 

SarJoE

My misconception then. I assumed any money given would be subject to the tax.  The living situation is no issue and wasn’t the subject of the thread.  It’s a purpose build ground floor flat, own facilities.  Many thanks for your advice, really appreciate it.

Keep_pedalling

SarJoE said:

My misconception then. I assumed any money given would be subject to the tax.  The living situation is no issue and wasn’t the subject of the thread.  It’s a purpose build ground floor flat, own facilities.  Many thanks for your advice, really appreciate it.

It’s a common misunderstanding, the UK had no gift tax, and apart from really rare cases it’s the estate that pays IHT not recipients of lifetime gifts. If someone gave so much away their estate had insufficient funds left to pay the full amount of IHT due then their would be some claw back.

This is not the same in some European countries, the ROI levies capital acquisition tax on the beneficiary of gifts and inheritances not the giver/estate.  

Clowance

Unclear about gifting money not our of income (ie out of capital), found this

"How much can you gift a child tax-free UK?

You can gift up to £3,000 per tax year tax free. This is the total amount gifted, not per person. So you would need to spread this around your family if you wanted to gift money to multiple family members. A married couple or those in a civil partnership will have an annual exemption of £3,000 each"
could an expert clarify? I would like in the future after an expected inheritance to me to be able to gift 40,000 to each child for a house deposit.