Gift with reservation

INOPSU

How is this decided. I am doing some planning. Mum is well 7 years ago she  had to sell  her flat £400k which I shared, becuase she was becoming housebound due to increased infirmairty. 32 steps for an 83 year old.  During this time   I was caring for her as well as working. She gave me the proceeds so I could buy,  for us, a more suitable flat, with lift and ensuite. I also had to taken out a mortgage. Mums health has deteriorated  further since and for the last three years I have been her full time carer, giving up work and receiving AA and CA.
Questions 
1) So now it is 7 years is the money gifted no outside of IHT? 
2) Or would it be be considered a gift with reservation?  If so
3) There is an exception relating to infimaty which I think would be relevant as we had to move because mum was becoming housebound. 
4) Mums estate in any case would not exceed the IHT rate if I included transfer of dads NRB 
5) So when the time comes and I hope its not for a long while - can just a probate form be done.

Keep_pedalling

1. No because as you suggest it is a gift with reservation of benefit.
2. see 1
3. No
4. Correct, the estate can use the transferable NRB so no IHT liability. You could also use her residential NRB.
5. If you use the transferable NRB then yes you only need to apply for probate. Any use of the RNRB would need an IHT return.

INOPSU

Thnaks keep_pedalling

Out of interest why do you say No to query three about an exception due to infirmatity.  That is clearly stated under Exceptions in the legislation - Finance Act 1986, SCHEDULE 20.  Mum had to move as she could no longer gain easy access to her flat and she had restricted vision.  I am now her full time carer.  The alternative would have been to put mum in a care home.

6

(b)in the case of property which is an interest in land, any occupation by the donor of the whole or any part of the land shall be disregarded if—

(i)it results from a change in circumstances of the donor since the time of the gift, being a change which was unforseen at the time and was not brought about by the donor to receive the benefit of this provision; and

(ii)it occurs at a time when the donor has become unable to maintain himself through old age, infirmity or otherwise; and

(iii)it represents a reasonable provision by the donee for the care and maintenance of the donor; and

(iv)the donee is a relative of the donor or his spouse [or civil partner];

Answer to 5 should solve everything as the estate is less than £650k.  Would I need to fill in a transfer form@, if so which? or just prove evidence of my fathers 100% transfer to mum. The thought of going throu the IHT400 form and others is enough to sink anyone

Mum I am pleased to say is live and well

Thnaks for you advice

theoretica

INOPSU said:

Thnaks keep_pedalling

Out of interest why do you say No to query three about an exception due to infirmatity.  That is clearly stated under Exceptions in the legislation - Finance Act 1986, SCHEDULE 20.  Mum had to move as she could no longer gain easy access to her flat and she had restricted vision.  I am now her full time carer.  The alternative would have been to put mum in a care home.

6

(b)in the case of property which is an interest in land, any occupation by the donor of the whole or any part of the land shall be disregarded if—

(i)it results from a change in circumstances of the donor since the time of the gift, being a change which was unforseen at the time and was not brought about by the donor to receive the benefit of this provision; and

(ii)it occurs at a time when the donor has become unable to maintain himself through old age, infirmity or otherwise; and

(iii)it represents a reasonable provision by the donee for the care and maintenance of the donor; and

(iv)the donee is a relative of the donor or his spouse [or civil partner];

Answer to 5 should solve everything as the estate is less than £650k.  Would I need to fill in a transfer form@, if so which? or just prove evidence of my fathers 100% transfer to mum. The thought of going throu the IHT400 form and others is enough to sink anyone

Mum I am pleased to say is live and well

Thnaks for you advice

I suspect you are missing the 'ands' at the end of those clauses -it looks like i needs to apply as well as ii to iv.

INOPSU

Not sure I understand your response. Mum had to sell as she was effectively housebound and needed en suite. So from what I can see the gift is exempt as it meets all the criteria.
With regards my query 5, any thoughts on which form would be required to be filled in . Probably best for me to contact IHT direct when time comes. Not yet though TG

theoretica

How are you interpreting 'it results from a change in circumstances of the donor since the time of the gift, being a change which was unforseen at the time'?

INOPSU

Well we had to move because mums infirmity was such that she would be housebound. Her infirmity since the move has indeed worsened to the point I had to give up work and become her carer.  I don't no how HMRC would interpret this under their own guidance.

In saying all this if I transfer my  deceased dads full NRB when the times come and given mums estate is well below £650k there  is no IHT. But just forms.  Would it be just probate to submit form plus the H402 or as an excepted estate form. How do you report an excepted estate after March 2023. HMRC bloody confusing.

bobster2

Your mother's need to occupy the new property was not as a result of "a change in circumstances of the donor since the time of the gift, being a change which was unforseen at the time".

Her need to move in was part of the rationale for the gift - at the time.

This exemption might apply if - fit healthy person gives relative a house thinking they'll never need it again - later gets ill and needs to move in with the relative (a change in circumstances of the donor since the time of the gift).

INOPSU

Bobster2 are you a registered  tax advisor as I have had different advice.  In any case it looks as if I can use my dads unused NRB when time comes. 

bobster2

INOPSU said:

Bobster2 are you a registered  tax advisor as I have had different advice.  In any case it looks as if I can use my dads unused NRB when time comes. 

No of course I'm not. If you want advice from a registered tax advisor - find one and pay for consultation.You asked on a public forum.

You can read the legislation yourself if you like...

https://www.legislation.gov.uk/ukpga/1986/41/schedule/20/crossheading/exclusion-of-benefit?view=plain

As a non-expert I cannot see how your situation satisfies point 1 b (i).
In simple terms, if I give you some money and say "hey - can you buy a place where I can live with you" that is clearly reserving a benefit.

But in any case, why are you even concerned about using the infirmity exception if her estate won't be in IHT territory anyway???

INOPSU

I just rejoined and saw comments. Lets be clear msb1234.  Had to mov as my eldrley mum couldnt make stairs to flat as there was no lift. Moed to another property with lift. More expensive so I needed to be the mortgage holder as she was too old. With the current NRB do not even qaulify for IHT