The “I will give my property away to my children to avoid any IHT” myth

In the third of our series of myth-busting articles, Sarah Nash discusses the myth that giving away your home to your children is always efficient tax planning.

Sarah explained “The commonly held belief is that a transfer of a property will place it outside of the former owner’s Estate and will therefore reduce the Inheritance Tax liability on their Estate.   Another variant of the myth is that the owner must survive 7 years after the transfer in order to avoid paying Inheritance Tax on the property.   Neither are actually true.

If you were still living in the property at the time of your death, HMRC deem you to have reserved a taxable benefit in the property and it is then treated as property of your Estate.”

Sarah continued “There are, of course, other, more basic issues to consider as well – such as the fact that by making such a transfer, your children will have all the rights of an owner including the right to dispose of the property – without obtaining your consent.

To make a transfer such as this an effective method of tax planning, some people choose to gift their property to their children and lease it back from them at a market rent.   Whilst this side-steps the reservation issues, there are many who are understandably reluctant to do this.”

At Astle Paterson, we understand that many people are concerned about their Estates being diminished by Inheritance Tax and wish to protect their Estate for the benefit of those they wish to inherit and we have experienced Lawyers who can advise as to the steps you may be able to take to minimise the Inheritance Tax liability – which are both legal and effective.

If you would like to speak to one of our Wills and Probate team please telephone the Department’s Direct Dial telephone number: 01283 743969.

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