Deed of Gift Question

[andrewiltn]

My mother in Law crated a Deed of Gift in 1996 in which she 'sold' her house to the Trustees to be in trust for her duaghter. There was no financial settlement and mother in law continues to live in the house. There is no Inheritance Tax liability although its value has risen from about £80K to £150K during the 10 years.

My questions are:
1. Is there a tax liability arising now for the trustees and, if so, what ?
2. What would be the tax liability on Mother in Law's death when the property is sold ?
3. If she decides to move into sheltered accommodation and the house is sold to realise an income to subsidise her rent, what tax liability would there be ?

Grateful fo any advice.

[AvocadoK]

Hi Andrew
It looks as if she made a gift with reservation of benefit. This means that the house remains in her estate for IHT while she is living there.
1. There is no liability for the trustees - no ten year charge will apply as the value of the assets is less than the nil rate band - always assuming she made no other gifts in the seven years preceding 1996.
2. Not if the property fell within the nil rate band - currently £285k
3. The trustees would be able to claim CGT exemption as the beneficiary was living in the house as her main residence under the terms of the trust.
Hope this helps
David

[andrewiltn]

David,

Thank you for your answers. I am relieved.

Andrew