Mum gifted house and continued to live in it (advice needed)

[pqtaxation]

Markedman

No doubt maths will respond himself.

But for my part, I said in a previous post I’d look at UK legislation today if the position was still unclear to you and me. I believe maths has made the position on IHT in relation to your mother’s death as clear to the extent possible when done remotely and without knowing all the specific circumstances of your father’s estate, your mother and you. You wrote that your father’s estate owned real property alone valued at £1.3m over 7 years ago and so was worthy of the family taking professional advice. Surely that is still the position today and it has been unwise not to have apparently done so when many things have changed since that initial (possibly incorrect) advice was taken – e.g. the advent of the transferable in rate band in 2007 (which may be relevant to your circumstances) and of relevant property trusts in 2006 (which may not be relevant).

It’s time, I’d suggest, to go back to get some current professional advice from the previous adviser armed now with a better understanding of the interaction between a PET of an entire dwelling house and GWRB. If thereafter you do feel you were given negligent advice previously, there is always the threat of complaint/action for negligence which at a minimum should lead to no further fees and extra service levels as no professional wants that hassle.

I’m glad my initial thinking was correct over that interaction re UK IHT. It does seem to be slightly different in Ireland –hence my initial confusion yesterday when in a hurry. So as complex as the UK legislation seems to you, just be thankful you don’t have to be concerned with the (subtle) variations in Ireland within a tax regime they call capital acquisitions tax!!

[markedman]

thanks pq

i know there are various other factors to take into account which further complicates the situation

i know my mother gifted properties worth £750,000 (including mine) presumably to use up her nil rate band of £650,000

however, i think you are correct that i will need to speak to the accountant who originally advised us.

[pqtaxation]

[quote="markedman"] .... a) ... I know there are various other factors to take into account which further complicates the situation.

b) .... I know my mother gifted properties worth £750,000 (including mine) presumably to use up her nil rate band of £650,000 [quote]

Re a) there invariably are such factors in every situation which equally invariably means any "advice" offered in a forum such as this, even from the experts such as maths (not me), is not a substitute for specific face to face advice from a suitable professional -- the problem for the lay person is to know how to identify such. In your case your may want to look for someone who is STEP and/or CTA qualified rather than just an accountant (which designation currently requires no specific qualification --- not even a general accounting one!!)

Re b) her NRB only became £650k in effect since 2007 - that is after your father died and you last took advice - if indeed that was ever her effective NRB after his death.

[maths]

im just saying that in general what i was told by the accountant 7 years ago doesnt seem to make much sense now

im struggling to see what advantage we have gained by my mum gifting her house to me 7 years ago

it has cost her market rent for 7 years yet it has not become a PET and will go back into her estate if she required nursing home care apparently

how has my mum gifting her house to me helped her IHT situation?

It is always both difficult and dangerous to comment on advice tendered by other advisors in the absence of all the facts and circumstances at the time. In addition the legislation is complex and not all advisors necessarily agree on all issues.

The gifting by mother and her payment of market rent thereafter was effective to remove her house from her estate on her death for IHT. If she survived 7 years after the gift then the original PET would also no longer be in point.

So, if your mother died after 7 years whilst occupying the property no IHT would arise.

Such planning is quite common; often it is necessary to weigh up the income tax consequences of paying and receiving rent against the IHT saving.

If she at anytime ceases to pay market rent then at that point the house falls back into her estate on death and the IHT saving is thus lost.

I currently don't have access to legislation but I think I need to re-check a view I expressed earlier about the IHT consequences should your mother move into a Care Home ie whether this precipitates a deemed PET or not.

[markedman]

Maths, once again thanks for your advice in what i appreciate is a complex situation which is open to different interpretations


the care home situation is an unlikely event as if/when my mother needed full time care i would move in with her and provide it given that me doing so does not affect the IHT situation or create a gift with reservations.

however if you did come across the relevant legislation regarding care home and iht/gwr i would be interested to know for peace of mind

regards.

[maths]

Finding peace of mind in the tax business is sadly almost impossible !!