- Sell the property, downsize and make a cash gift to a donee out of the proceeds. The amount of the gift needs to be sufficient to reduce the taxable estate to below the exempt amount, the remaining money being used to purchase a less costly property. The gift of cash is a deemed potentially exempt transfer (PET) for inheritance tax (IHT) charge purposes and there will be no ‘Gift With Reservation Of Benefit’ problems as there is no retained benefit. However, the donor does have to live for seven years for the gift to be totally IHT-free.
- Sell the property to a donee for the market price and then lease the property back, paying the full market rent to live there. The monies received could then be gifted in the form of PETs, or spent. Any capital appreciation will accrue to the recipient, the purchase money being raised via a qualifying loan. There would be practical issues such as the seller’s security of tenure, stamp duty land tax payable on the sale, the market rent would be subject to income tax in the recipient’s hands, and the capital gains tax Principal Private Residence relief might not be available for the recipient on the subsequent sale of the property.
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