giving away the family home

kingarhu

My parents are considering putting the deeds of their house into the names of their children in order to avoid future inheritance tax. I'm pretty sure that this won't work, and that it will still count as part of the estate, but can anyone tell me for sure?

sneekymum

It could work - if they paid a proper market rent to live there - on which the children might pay income tax, depending on whether they have other earnings. It would need to go on their tax returns as income to have it officially recognised. And IHT would only be avoided if the parents survive seven years after the gift.

There would be capital gains tax to pay in the future when the property is eventually sold. Depending on what naughty things the children get up to their share in the property might be seized as an asset if for example they became bankrupt. People can also fall out. Get married and then drop dead leaving an inlaw in posetion of a share.

In all its a poor idea.

If both parents are alive why not just have wills that make use of the nill rate band? - leave £275K worth of equity only on the first death. OK - they might go together - but how likely is that?

mountainofdebt

For all the reasons mentioned. For the amount of IHT it would save the potential to open a hornets nest its simply not worth it.

I'm sure that a good financial advisor could suggest other ways that your parents could avoid paying IHT.