Giving Your Home Away to beat Inheritance Tax
Giving Your Home Away to beat Inheritance Tax
If you are planning to give your house away to beat paying inheritance tax here are a few points you need to consider depending on your circumstances.
You need to bear in mind, if you are planning to give your home away to your children while you're still alive, that:
- gifts to your children, unlike gifts to your spouse or civil partner, aren't exempt from Inheritance Tax unless you live for seven years after making them
- if you keep living in your home without paying a full market rent (which your children pay tax on) it's not an 'outright gift' but a 'gift with reservation,' so it's still treated as part of your estate, and so liable for Inheritance Tax
- following a change of rules on April 6, 2005, you may be liable to pay an Income Tax charge on the 'benefit' you get from having free or low cost use of property you formerly owned (or provided the funds to purchase)
- once you have given your home away, your children own it and it becomes part of their assets. So if they are bankrupted or divorced, your home may have to be sold to pay creditors or to fund part of a divorce settlement
- if your children sell your home, and it is not their main home, they will have to pay Capital Gains Tax on any increase in its value
If you don't have a will there are rules for deciding who inherits your assets, depending on your personal circumstances. The following rules are for deaths on or after July 1, 2009 in England and Wales; the law differs if you die intestate (without a will) in Scotland or Northern Ireland. The rates that applied before that date are shown in brackets.
For a comprehensive review of your finances and assistance with inheritance tax planning advice please speak with one of our partner independent inheritance tax planning advisory firms for a no obligation consultation.
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