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Where Taxpayers and Advisers Meet

Options re transfer of assets

alistairturner@btint
Posts:1
Joined:Wed Aug 06, 2008 3:06 pm

Postby alistairturner@btint » Tue Oct 21, 2003 3:11 am

Mother in law is 81 and in poor health and is intent on minimising tax liability on death.
Lost husband in 1999 and lives in house value approx.£200,000 with other liquid assets totalling £40,000. She has daughter and son who are early 50's and have their own familys.
While not yet within IT threshold, this could change if house prices continue to rise. Would it be advantageous to transfer title to joint names of brother and sister with mother then paying them rent or could CGT raise its head if property values soared?
Another alternative is to transfer some liquid assets to son and daughter but there would be some clawback over 7 yrs if house value increased to breach IHT figure.

accountant@uktaxshop
Posts:550
Joined:Wed Aug 06, 2008 3:04 pm

Postby accountant@uktaxshop » Tue Oct 21, 2003 4:58 am

Alistair,

Firstly I should point out that an attempt to give away her property will not result in it being removed from her estate at death if she remains living it, and none of the beneficiaries do. This would be seen as a "gift with reservation of benefit" and actually causes more problems as the beneficiaries end up with a capital gain arising on the sale of the property.

There are a few schemes around to reduce the value of the estate, but these are costly to set up and as you do not currently have a liability are probably not worth looking at at the moment, unless the property is located in a high growth area.

I would suggest you first look more at the liquid assets which can be readily dispersed. £3,000 can be given away each tax year with no implications, as well as any number of £250 gifts to single beneficiaries (eg grandchildren or friends)

Further gifts are subject to the 7 year rule you touched on, so that the proportion of gifts remaining in the estate at death are:

Gifts made within 3 years 100%,
gifts made between 3 and 4 years 80%,
4 to 5 60%
5 to 6 40%
6 to 7 20%

It is also worth noting that even if the whole estate does breach the £255k barrier, only the excess will be subject to IHT at 40%. Ie an estate valued at £265,000 would pay only £4,000 in taxes.

I trust this is helpful to you.

Regards

James Smith
Chartered Accountant
www.uktaxshop.co.uk
01284 764436


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