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Where Taxpayers and Advisers Meet

rent-free home / iht?

bsmith
Posts: 5
Joined: Fri Dec 26, 2014 1:47 pm

rent-free home / iht?

Postby bsmith » Tue Dec 03, 2019 10:08 am

The deceased shared her home (owing 95%) with a friend. The property was inherited by her daughter, presumably to save IHT. The daughter, who lives abroad, will now allow the friend (elderly but in good health) to live in the property rent-free for life.
What are the formalities / is this a settlement with IHT to pay? The daughter would prefer an informal arrangement.

AGoodman
Posts: 881
Joined: Fri May 16, 2014 3:47 pm

Re: rent-free home / iht?

Postby AGoodman » Tue Dec 03, 2019 11:13 am

It wouldn't be a settlement provided it remains informal and the occupant is effectively there under licence or tenancy at will, which can be terminated on notice.

If there was a document or possibly a verbal confirmation that that she had the right to live there for life, that would be a tenancy for life which is a settlement.

It might be sensible to document the arrangement as an AST to avoid any inferences.

AGoodman
Posts: 881
Joined: Fri May 16, 2014 3:47 pm

Re: rent-free home / iht?

Postby AGoodman » Tue Dec 03, 2019 11:13 am

It wouldn't be a settlement provided it remains informal and the occupant is effectively there under licence or tenancy at will, which can be terminated on notice.

If there was a document or possibly a verbal confirmation that that she had the right to live there for life, that would be a tenancy for life which is a settlement.

It might be sensible to document the arrangement as an AST to avoid any inferences.

maths
Posts: 7591
Joined: Wed Aug 06, 2008 3:25 pm

Re: rent-free home / iht?

Postby maths » Tue Dec 03, 2019 7:33 pm

Does the friend own the other 5%?

bsmith
Posts: 5
Joined: Fri Dec 26, 2014 1:47 pm

Re: rent-free home / iht?

Postby bsmith » Tue Dec 03, 2019 8:01 pm

Yes, the friend owns 5% but no income or money to buy the 95%.

maths
Posts: 7591
Joined: Wed Aug 06, 2008 3:25 pm

Re: rent-free home / iht?

Postby maths » Thu Dec 05, 2019 2:21 pm

I would have thought the ownership of the 5% entitled the friend to occupy the property by virtue of her interest.


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