Gifted Home living together still

[tonysp]

Hello

I am seeking thoughts of others on my matter in regards to Inheritance Tax

My mum wishes to transfer her home into my name completely

We are also thinking she might transfer it 50 percent to myself and 50 percent to my son who is only 3 years old

We all currently live in the same home all together including my wife for the last 7 years or so . since my father passed away in 2010 .. I returned to stay with my mum so she would not be alone

My mother is in good health at this present time and the home is valued in the region of 900,000 to 1.1 million GBP based on similar neighboring properties

My financial situation is not so great in regards to being self-employed and always struggling to find work , we are currently also receiving tax credits my wife and I

Currently my mother and I share all expenses to upkeep our home such as bills , food and repairs if needed

I am quite confused with all the information out there in regards to this matter of Inheritance Tax is it deliberately made complicated to ensure simple people cannot reduce the liability

Especially in regards to articles like this

https://www.clarkewillmott.com/elderly- ... mily-home/

https://www.gov.uk/inheritance-tax/passing-on-home

that mention terms such as :

- gift with reservation of benefit

- Full market Rent - But where full consideration is paid for the continuing benefit, then those provisions do not apply

- POAT

Thank You

Tony

[tonysp]

Help ?

[maths]

If mother gifts all or part of her property but continues to live in it then in principle the whole property remains in her estate for IHT ie nothing is achieved.

However, as you and your son (as recipients) also live there then as long as mother pays for her share of the expenses (or more than her share eg all of them) then the gifted percentages of the property will no longer form part of her estate for IHT.

[tonysp]

Thank you Maths for a reply

So if she gifts 50 percent ... Then continues to live with us

Pays more of the expenses ( bills etc ) .. so the 50 percent she gifted is not subject to IHT

This is what I was also seeing from my research on google but needed some clarification from someone with more experience .. thank you Maths

.. she does not have to pay rent correct ?

[maths]

There is no need for mother to pay rent.

By mother continuing to pay all or most of the expenses this precludes her gift of 50% being treated as a gift with reservation and thus remaining in her estate for IHT.

The gift would still be a PET and so she would need to survive for 7 years thereafter.

[tonysp]

The PET drops on value as each year goes by yes ?

Years between gift and death Tax paid

less than 3 40%
3 to 4 32%
4 to 5 24%
5 to 6 16%
6 to 7 8%
7 or more 0%

https://www.gov.uk/inheritance-tax/gifts

I looking also at the option of her gifting it the home 100 percent .. to my son and I

If this happens and of course naturally she will continue to live with us

What are the implications ?

She must pay full market rate for the lodgings ?

To ensure it is not treated as a Gift with Reservation ?

Tony

[maths]

It is not the value of the PET itself which drops in value over the 7 years but the quantum of IHT payable should she die within that period.

The protection from a reservation of benefit charge when basically you live with mum does not apply if she gifts 100%. In practice 50% or thereabouts is the maximum she can gift.

If she does gift 100% then she will need to pay a market rent to continue to occupy it and on which the recipient of the rent will have an income tax charge.

[tonysp]

That clears up a lot of things for me Maths thanks

It is interesting

If you go the 100 percent route of gift

My mother pays the full market rent to continue to occupy

Technical she is a lodger ?

Does that qualify us to apply for this then also :

The Rent a Room scheme

https://www.gov.uk/rent-room-in-your-ho ... oom-scheme

to ensure to minimize the income tax charge ?

Tony

[tonysp]

Hi Maths

We are moving down the 50 percent method

Property has no mortgage I think its been free of that for about 10 years or so

If my mum gifts 50 percent to myself and my son

Is Stamp Duty to paid ?

I am reading it depends on how the transfer of that 50 percent is done ?

Tony