IHT implications when returning a gift?

GreyMetalWizard

Hi, 

I was gifted a rental property by my father. It is mortgage free and has a tennant in it. 

Due to a breakdown in relationship he wants it back. 

If I sign the property back over to him, and he dies in (for example) 2 years time, then will I still be liable to the IHT ? 


I'm confused, because, I see 2 conflicting points:

1) I received a gift from him within 7 years of his (hypothetical) death. So could be liable to IHT.


2) The property is back in his estate so no longer gifted, and not liable for IHT



Thanks in advance.

The_Unready

It presumably wasn't a gift, then, because if it was you'd have told him he wasn't getting it back?

Grumpy_chap

GreyMetalWizard said:

Hi, 

I was gifted a rental property by my father. It is mortgage free and has a tennant in it. 

Due to a breakdown in relationship he wants it back. 

If I sign the property back over to him, and he dies in (for example) 2 years time, then will I still be liable to the IHT ? 


I'm confused, because, I see 2 conflicting points:

1) I received a gift from him within 7 years of his (hypothetical) death. So could be liable to IHT.


2) The property is back in his estate so no longer gifted, and not liable for IHT



Thanks in advance.

A gift is a gift and is absolute.

What was the reason for the property being gifted to you in the first place?

Who receives the income from the Tenant?

Was CGT paid by your father when he gifted you the property?
Have you considered the CGT you will now incur on disposal of the property?

Keep_pedalling

You won’t be liable for IHT but his estate will be. Hypothetically it could double count in his estate if he dies within 7 years of the original gift as gifting it back does not undo the gift.  If could als double count in your estate if you inherit it back. You also may have a CGT liability on any transfer you make.

Who has been receiving then rental since he gifted it to you? 

SVaz

Isn’t the obvious solution for him to pay you rent rather than having the property back?  

sheramber

SVaz said:

Isn’t the obvious solution for him to pay you rent rather than having the property back?  

Why would the father pay rent for a house occupied by a tenant?

GreyMetalWizard

Grumpy_chap said:

GreyMetalWizard said:

Hi, 

I was gifted a rental property by my father. It is mortgage free and has a tennant in it. 

Due to a breakdown in relationship he wants it back. 

If I sign the property back over to him, and he dies in (for example) 2 years time, then will I still be liable to the IHT ? 


I'm confused, because, I see 2 conflicting points:

1) I received a gift from him within 7 years of his (hypothetical) death. So could be liable to IHT.


2) The property is back in his estate so no longer gifted, and not liable for IHT



Thanks in advance.

A gift is a gift and is absolute.

What was the reason for the property being gifted to you in the first place?

Who receives the income from the Tenant?

Was CGT paid by your father when he gifted you the property?
Have you considered the CGT you will now incur on disposal of the property?

Thanks for the reply.

I'm not 100% sure of the reason for the gifted property. He isn't always honest.

I get the income from the tenant. He wants some of it. 

Yes, he paid CGT.
Yes, I considered the need for me to pay CGT when returning it.

GreyMetalWizard

Keep_pedalling said:

You won’t be liable for IHT but his estate will be. Hypothetically it could double count in his estate if he dies within 7 years of the original gift as gifting it back does not undo the gift.  If could als double count in your estate if you inherit it back. You also may have a CGT liability on any transfer you make.

Who has been receiving then rental since he gifted it to you? 

Thanks for the reply. I was concerned about this. That the gift is permanently on the estate. Even if returned. Have you got a reference for that please?

The receipt of a gifted property can be liable to paying IHT, not the estate if the value of it is high enough. He has given multiple properties away so has used the allowances ( as I understand it) .

GreyMetalWizard

I see the questions about "who gets the rent". I'm aware of GWB or GROB and it's implications for the 7 years.  Thanks.

SVaz

I was assuming he wants the house to live in

Keep_pedalling

GreyMetalWizard said:

Keep_pedalling said:

You won’t be liable for IHT but his estate will be. Hypothetically it could double count in his estate if he dies within 7 years of the original gift as gifting it back does not undo the gift.  If could als double count in your estate if you inherit it back. You also may have a CGT liability on any transfer you make.

Who has been receiving then rental since he gifted it to you? 

Thanks for the reply. I was concerned about this. That the gift is permanently on the estate. Even if returned. Have you got a reference for that please?

The receipt of a gifted property can be liable to paying IHT, not the estate if the value of it is high enough. He has given multiple properties away so has used the allowances ( as I understand it) .

If you give it back it remains part of your estate for the next 7 years so it could cost your loved ones to be on the end of an IHT liability on an asset you no longer own.

Your father’s estate potentially has a double liability on the house, although I am unable to find anything to back that up as I could find nothing that covers the regifting of gifts on the web (probably because no one does it). He would need to take professional advice on that situation. 

Frankly as he does not need it back for financial reasons I would simply decline his request and avoid all the potential complications.