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Where Taxpayers and Advisers Meet

Lifetime mortgage and tax liability

Joined:Thu Nov 17, 2011 8:01 pm
Lifetime mortgage and tax liability

Postby greenjersey » Tue Jan 25, 2022 6:01 am

Hello, I was considering taking out a lifetime mortgage on my home so I can gift £80,000 each to my two daughters. This will enable them to upgrade their homes. However I have a terminal illness and there is no prospect of me surviving for seven years. If I transferred the money to my wife, who is younger than me and in robust good health, and she then passes the money on to our daughters would that avoid an I.T. tax liability on my death? Thanks in advance

Joined:Wed Aug 06, 2008 3:25 pm

Re: Lifetime mortgage and tax liability

Postby maths » Tue Jan 25, 2022 3:03 pm

The lifetime gift of monies to your wife would be an IHT exempt inter-spouse transfer whether you survive 7 years or not thereafter.

Thus, on your death no IHT charge arises on the gift.

As and when the wife gifts in her lifetime to the children she would then need to survive for 7 years to totally avoid any IHT implications.

Joined:Sat Feb 01, 2014 3:26 pm

Re: Lifetime mortgage and tax liability

Postby bd6759 » Wed Jan 26, 2022 1:53 am

If you give your wife £160k on the understanding that she gives it to your daughters, you haven’t really given it to your wife.

I’m also a little concerned about what will happen to your home when you die? Will it need sold or will you saddle your wife with a mortgage?

I think you need to think this through and take competent planning advice. We don’t even know if IHT will be an issue when you die, so can’t comment on whether the 7 year rule is relevant: it is usually better to reduce your estate if IHT will be an issue.

Joined:Wed Aug 06, 2008 4:06 pm
Location:West Sussex

Re: Lifetime mortgage and tax liability

Postby pawncob » Wed Jan 26, 2022 12:52 pm

The fact that you're raising a mortgage to make the gifts suggests that your estate will be under the IHT threshold so the 7 year gift limit is irrelevant.
As others have said, of more concern is your wife's position in the future.
With a pinch of salt take what I say, but don't exceed your RDA

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