inheritance tax...

[joko]

if a property is in 2 peoples names, and they choose to give it as a gift, then within 7 years one of them dies...is the person still liable for inheritance tax...? even if one of them is still alive?

thanks

[VHG]

Note the following about giving away your home as a gift

Q. Giving your home away and continuing to live in it

A. You can continue to live in your home as your primary residence after giving it away, provided you pay a market rent to the new owner. Bear in mind that the new owner may have to pay Income Tax on the rent you pay them.

If you don't pay a market rent, the gift will be considered a 'gift with reservation of benefit' and the house may be subject to Inheritance Tax.

[joko]

they dont live in the house, they just own it...they rent it out at the moment, but wish to give it to their son... i think he is wanting to live in it...

but isnt inheritance tax only payable if the person dies within 7 years?


i potentially have a similar issue myself.

[LoftyLottie]

I see what you mean Joko.

2 people actually making a gift in joint names and one dies. I would think, only think, that inheritance tax would only be payable if both die within seven years. Interesting question. Probably barmaid would know.

[Graham-W]

The seven-year rule - 'potentially exempt transfers'

Any gifts you make to individuals will be exempt from Inheritance Tax as long as you live for seven years after making the gift. These sorts of gifts are known as 'Potentially Exempt Transfers' (PETs).

However if you give an asset away at any time, but keep an interest in it - for example you give your house away but continue to live in it rent-free - this gift will not be a potentially exempt transfer.

If you die within seven years and the total value of gifts you made is less than the Inheritance Tax threshold, then the value of the gifts is added to your estate and any tax due is paid out of the estate.

However, if you die within seven years of making a gift and the gift is valued at more than the Inheritance Tax threshold, Inheritance Tax will need to be paid on its value, either by the person receiving the gift or by the representatives of the estate.

If you die between three and seven years after making a gift, and the total value of gifts that you made is over the threshold, any Inheritance Tax due on the gift is reduced on a sliding scale. This is known as 'Taper Relief'.

[LoftyLottie]

Thinking about it, if it were a married couple and one died then the other would probably inherit the house unless a will declared otherwise. So the person who was gifted the house wouldn't be inheriting it. So why would they pay inheritance tax anyway.

[joko]

thats sort of my point loftie...they wouldnt be inheriting it as one owner who has gifted it is still alive, and in effect they inherit full control, instead of half as before...so the gift is still a gift rather than 'inherited'...

[LoftyLottie]

Well, that's what I think too Joko.