inheritance

brickiebuild

My father has an estate of around £1.8million in the shape of 1 property of about £1.5 and another small flat £400,000. If my father gifts those two properties to myself and my two sisters and remains in the main property would he have to pay a market rent ? If one of us was to move in the house with him would he still have to pay a rent ? What are the implications of setting up a trust and gifting the properties to the trust ?

Keep_pedalling

Your father would be foolish in the extreme to gift both of his properties away. Yes he would have to pay you full market rent for his home if he gifted it to you in order to avoid it being a gift with reservation of benefit. He would also not be able to receive any rental from the flat for the same reason.

He would also likely to have a capital gains tax liability on the non residential property based on the gain between the value at the time he obtained the flat and the value at the time of gift. You would also face a CGT liability when the main home was eventually sold. 

Why does he not just downsize and gift cash instead? 

What is his marital status?

What is the value of any other assets he owns? 

Brie

And don't forget that deprivation of assets may be an issue should he need funded care at some point.  There's no statute of limitations on giving away assets in this context.

Grumpy_chap

brickiebuild said:

My father has an estate of around £1.8million in the shape of 1 property of about £1.5 and another small flat £400,000. If my father gifts those two properties to myself and my two sisters and remains in the main property would he have to pay a market rent ? If one of us was to move in the house with him would he still have to pay a rent ? What are the implications of setting up a trust and gifting the properties to the trust ?

He may try to avoid IHT.  I suspect that would be unsuccessful as GWR seems to apply.

There may be SDLT to pay now - it may be at additional property rate if you and your sisters are already property owners.  If you are not, it will jeopardise your FTB status.

You and your sisters will incur a CGT liability when the properties are eventually sold.

It will not avoid Father needing to meet care costs should the need arise.

It may impact eligibility to means tested benefits should you or your sisters require them.

The properties might all get lost to a hostile divorce / relationship break up if the worst happens.

It does seem as though this is a very generous act as the country desperately needs to raise more tax revenue and this seems certain to do that.  Apparently, it is possible to simply gift HMRC money and that will probably be simpler.