Inheritance Tax

[smurfchops]

Can I get any info about leaving a house to a person's child seven years before they die (!) so the child doesn't pay inheritance tax?

[atalanta]

Careful. You have to give it, not leave it. You must do some research on gift tax, or the recipient may have to pay tax of up to 40 percent of the value of the gift. You can't make the recipient pay rent , either, or this becomes a "gift with reservations", which the Inland Revenue says is not a gift at all.
Start by going to the Citizens Advice Bureau, then, if they recommend, as they probably will, see a solicitor.
If a gift was given more than seven years before the giver's death, it should be free of inheritance tax, but remember, it is very difficult to evade tax without the services of expensive tax-experts and lawyers

[smurfchops]

Thanks atalanta, that was a very helpful answer.

[hc4361]

And remember the house will be an asset of your child's in the case of divorce, bankruptcy, benefits etc

[ubasses]

In addition to what has been said, if it is your intention to remain in the house you would have to pay the child a Market Rent or that would also make it a gift with reservation bringing it back into your estate for IHT.

[Tom Braider]

Smurfchops, I'm afraid you seem to have some misconceptions about Inheritance Tax. It's taken from your estate when you die, not from the person who inherits. If you give away the house now, it will only be removed from the value of your estate if you live for 7 years after the date of the gift. There's no such thing as gift tax, so there are no tax consequences at the time of the gift, but as has been said already the gift has to be made without reservation if it's not to be counted as part of your estate for inheritance tax purposes. So you can only do what I think you're intending if the house in question isn't going to be your home or in any other way used by you after you've given it away.

[Tom Braider]

...unless as has been suggested you rent it back at a market rent.