Inheritance tax minefields

2skintbikers

First off I am a newbie here and I apologise if I have posted this in the wrong place but I hope you can help with what feels like a real inheritance tax minefield.

My mum is 75, in good health, and owns her home outright. She wants to leave the house to me and my children, but she’s concerned about inheritance tax and the cost it could place on us when the time comes. The house was placed in a trust years ago but removed after changes in the law made it less effective.

Here’s the situation:

• I live with my mum, and so does my middle child (who’s an adult), and my younger child (aged 13).

• Both my adult child and I pay my mum our share of all the bills 💸 plus a little extra to the up keep of the house monthly — only the 13-year-old does not.

• We’d like to explore options for her to pass the house and some savings on to us without triggering a large IHT bill.

• Unfortunately, we can’t afford to get a mortgage to buy the house now.

We’ve read about gifting property and the 7-year rule, but we’re unsure how it applies when we already live there and pay her rent. Could this strengthen our position if she wanted to gift the house (or part of it) now, without it being considered a “gift with reservation of benefit”?

We’re also considering whether transferring a share of the house to us now (perhaps through a tenants-in-common arrangement or declaration of trust) could help reduce IHT liability down the line — but we don’t want to fall foul of any traps or cause care fee issues in future.

We’d really appreciate your guidance on what options might work best in our case and what to avoid.

Thanks so much for all the amazing advice you give — you make complex issues feel human and manageable.

Warm regards,

Neil

LHW99

Firstly, does / will your mum actually be liable to IHT?

Everyone has £325k allowance (property, savings, from 2027 residual pension). Also There is an additional £175k allowance if her house is left to a child or grandchild. So £500k before IHT bites.

Then, has your dad passed on? If so, his allowances would be passed on to mum (if they were married / civil partners)  - possible £1m total.

Mum needs to be careful in gifting part of the house, as CGT is payable on gifts. IHT could still be chargable if she passes in the next 7 years as gifts get added back into the estate.

Keep_pedalling

More info required please

What is the value of the house?
What is the value of her other assets? 

What is her marital status? 

PS as this has nothing to with pensions or retirement I have asked for it to be moved to the cutting tax board.

Marcon

2skintbikers said:

Thanks so much for all the amazing advice you give — you make complex issues feel human and manageable.

Warm regards,

Neil

Neil - without wishing to put a damper on your first post, not everything you'll read on this site is correct - googling, guesswork and Chinese whispers make regular unwelcome appearances!

Crucially, nobody reading your post has anything like the relevant information essential to giving good advice. Equally importantly, nobody here is insured to advise you, so a trip to a good solicitor is by far your best bet. Sometimes in life (and death!) you can't afford not to take proper professional advice if you wish to ensure the best outcome.

Brie

Also if she were to give you the house and then needed assistance from the council for providing her with care, at home or elsewhere, she may be accused of deprivation of assets.  Agree with Marcon that sometimes some professional advice is a good idea - maybe just a half hour free chat would be sufficient to give you and mom something to think more about and prepare you to answer more questions.