(IHT) House gifted, sold, gifter lived in new house rent free

[SG2000]

In 1995, my mother transferred ownership of her house to my brother and I and then continued to live there, alone, covering all bills apart from house insurance but not paying rent. I understand this arrangement is classed as a "Gift with reservation of benefit" (GWR) for IHT purposes.

In 1996, as my mother wished to move elsewhere, the house was sold, another house purchased and the same living arrangements continued as before until her death intestate in 2018. At the time of the move, the price of the second house was £50 (fifty pounds) less than the £85,000 selling price of the first (not including stamp duty). My brother paid for all additional costs of the move and advised me there would be no CGT to pay as we'd made no benefit of capital from the transaction. HMRC were not informed of the sale of the gifted property.

We are about to apply for a Grant of Representation and the question now arises as to which property should be considered to have been part of my mothers estate as a GWR for IHT purposes (IHT403). If the first property, then how would the value be assessed?

The second house, in which she lived for 22 years, is in need of renovation and probably now worth £275,000 at most.

The rest of my mother's estate has a value of about £12,000, so it may be moot whether there is IHT to pay, but I can find no examples of how this kind of situation has been handled by others.

[pawncob]

The second property is the one subject to GWR. The benefit of the first one ceased on sale.

[maths]

The sale of the original property by you/brother would have given rise to a CGT charge if sale proceeds exceeded the market value of the property wen it was gifted.

As pawncob indicates the reservation of benefit on the first property ceased but such a reservation arose when mother moved into new property.

[SG2000]

Thanks for your replies.

Can you offer any guidance on how to detail the first and second reservations in IHT403? Need both be declared?

[AGoodman]

I would go with Yes to Q8 and then put the details in Q12 - including the address of property A and state that it was replaced by property B in the third column.