Giving Home Away

[toppy007]

My father in law is currently unwell and is fretting about what to do about his estate. His wife died 18moths ago and used up her £325K IHT allowance.

His estate is now worth approx. £625K and hence would be looking at a hefty IHT bill of around £195K should the worst happen.

I've read that he could give his house away to his daughter (my wife) and continue to live there; and if he pays a market rate rental to her the house would be excluded from his estate for IHT purposes.

My question is; is the transfer of the house subject to the 7 year IHT taper relief or is it immediately excluded from his estate once he has handed over to his daughter?

[Lee Young]

The 7 year rule applies. Noimmediate exclusion. He would therefore need to survive 7 years before IHT is avoided.

Taper Relief only applies to the tax on the gift (not to the gift itself) and because of the way the rules are designed there is only tax attributable to the gift if the gift is over the available nil rate band when the donor dies.