Newspaper article The Evening Standard (London, England)

Can I Avoid Inheritance Tax on My Home?

Newspaper article The Evening Standard (London, England)

Can I Avoid Inheritance Tax on My Home?

Article excerpt


QI AM a widow and my middle-aged daughter has recently come to live with me and take care of me. Because of the value of my house there will be inheritance tax to pay when I die, so I would like to give some of my house to my daughter now. Friends tell me I need to be careful, though. Could you tell me how I should go about it? AYOUR friends are probably referring to what are known as the "gift with reservation of benefit" rules.

These stop you avoiding inheritance tax by giving something away while still using it. In these circumstances the taxman treats the asset as having remained in your estate for tax purposes so inheritance tax must be paid on it when you die.

However, there are exceptions to these rules and one of these could be of help to you. If you give your daughter a share in your home and you continue to live in that house, provided you comply with certain requirements, the gift will be free of inheritance tax.

The requirements are that both you and your daughter occupy the house jointly. Your daughter would need to move in properly and have full run of the house, rather than just occupy one room.

Second, you must not receive any benefit from the gift. This means you would need to meet your fair share of the running costs, so if you kept half of the house in your name you would need to pay half of the household bills.

Third, you must not collect any rent from your daughter.

If you do the above then, after seven years, the value of the share of your house that you gave to your daughter will fall out of your estate entirely and you will have successfully "gifted it" to her free of inheritance tax.

QWHAT is the best way to buy property as joint tenants or as tenants-in-common? Our financial adviser has said that as my boyfriend and I are not married we should buy as tenants-in-common.

AIF you were joint tenants, then the property would belong to both of you jointly and you would not own specific shares. …

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