Gifting part property answer

[vik2001]

Ok i been trawling the boards looking for answers regarding gifting property when living at home with a parent.
Was always getting mixed answers so i hired a tax barrister from chambers to provide answers. Heres in a nutshell what he said.

1. If you live at home with a parent and they gift you part of the property it cant be done as joint tenants else it will be a GROB for parent.

2. The tenancy has to be done as a tenants in common from the start of the gift to get the s102b exemption. As it has to be done as a undivided share.

3. Parent can buy the share back to break the gift and put everything back in their estate. Bringing the arrangement to a end.

[maths]

Don’t disagree.

[vik2001]

I thought i put this post up to help others.

My problem is im happy to live at home but worried incase mum outlives me and the issue it can cause in terms of iht on my estate in future.

Hmrc ruins lives

[vik2001]

So if im caught by grob being joint tenants if i was to sever the tenancy to pass my share on under my will to someone else, have i got around the grob by correcting it to tenancy in common. And does it start the 7 year pet again?

[maths]

Assuming the barrister's advice is correct then the gift by your mother to you has resulted in a GROB and the section 102B "let out" doesn't apply.

On your death prior to mum's death your estate will have an IHT charge on 50% of the property (as you own 50% in your own right) and in addition your mum's GROB continues on her part.

Her GROB can be terminated by her paying a market rent to you (broadly, 50% of market rent for the whole house).

So if im caught by grob being joint tenants if i was to sever the tenancy to pass my share on under my will to someone else, have i got around the grob by correcting it to tenancy in common. And does it start the 7 year pet again?

It's your mother who has made a gift which is then classified as a GROB on her part. If in lifetime you sever the joint tenancy converting it into a tenancy in common and on your death you leave your 50% to another person this does not remove the GROB on the part of your mother.

You haven't mentioned any figures and thus it is not possible to determine the extent of any IHT charges.

[vik2001]

The property is worth total 450k
Mother has 300k cash also

I have 200k in cash plus my share of house.

One solution to end the GROB i was thinking was i could gift the house back to mum and move out. Would that work?

Another solution which i dont know if it works is mum could buy out my share with cash. But i dont know if i could live in house after. And if that would trigger a pet for mum

[vik2001]

Assuming the barrister's advice is correct then the gift by your mother to you has resulted in a GROB and the section 102B "let out" doesn't apply.

In this situation mother and son still living at home. Can it also been seen as a POAT? Or is that only if it involved cash?

[maths]

Assuming your figures:

On death of Mum her estate would be [225 + 225 + 300] less [325 + 175] = 250k giving IHT at 40% 100k.
This assumes GROB (225) but with a nil rate band of 325k and a RNRB of 175k (which assumes she leaves her 50% by will to you).

(not sure if mother entitled to a transferable NRB and RNRB from husband? This is important as this could remove mother's IHT charge on death)

If you give your 50% back to mother there is no longer a GROB but the IHT effect outlined above stands (ie doesn't reduce mother's estate although reduces yours if you survive 7 years and move out).

If mother buys your share for cash (225k) the GROB disappears. Her IHT on death would then be [450 + (300 - 250)] less {325 + 175] = nil. No IHT. You stay in house.

A PET only applies to gifts not sales at market value.

[vik2001]

Yes maths she has my dads nrb as he left everything to her after his death.

If mother buys my share at market value could hmrc argue it could be a POAT charge in play? As shes got around the grob and im still living in the property....
Thnx

[vik2001]

Another question if i reversed the gift and moved out. As it would release the grob for mum would another 7years kick off for her?