Inheritance Tax on 2 properties - Gifting an option?

[skahmed]

My dad owns 2 properties, one of which he is living in, with both mortgages paid off.

In the event of his death, as per his will, one property would be inherited by myself and one by my brother.

My mother has already passed away therefore, I assume, her allowance of £325k goes to my father giving him a total IHT allowance of £650k.

Should my father gift each property to his sons and then survive 7 years, would there be any IHT to pay after he passes away? The market value of both properties would exceed the allowance.

Are there any CGT implications in this scenario (note, we don't plan to sell the properties)?

Thanks.

[jerome.lane]

If your father gifts you properties, he will have CGT to think about. If he gifts a property and carries on living in it without paying market rent, then the gift with reservation of benefit rules will dis apply the gift (even though he might have paid CGT on the gift) and IHT will still be due.

It looks like he will benefit from the residence nil rate band, so his nil rate band might look more like £1m when it comes to it.

It would be worth your father seeking some professional advice on estate planning to confirm the IHT exposure and best route forward rather than relying on forums.

[maths]

Best option for father to leave properties by will. Then no CGT (and sons get CGT free uplift) and two NRB's (650k) plus two RNRBs (300k) applicable to father's estate on death. Also any reservation of benefit issues avoided.

Above assumes all mother's estate passed to husband.