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Aston Lawyer
Aston Lawyer, Solicitor
Category: Law
Satisfied Customers: 10458
Experience:  Solicitor LLB (Hons) 23 years of experience in Conveyancing and Property Law
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My parents wish to reduce their estate, by gifting me their

Resolved Question:

Hi
My parents wish to reduce their estate, by gifting me their property, and since I own my own property I will in turn after a few months gift my property to my sisters. My sisters would in turn like for my parents to live in the gifted property.
Is there a problem with this really from the revenues point of the with regards ***** ***** tax?
Submitted: 2 years ago.
Category: Law
Expert:  Aston Lawyer replied 2 years ago.

Hello and thanks for using Just Answer.

My name is ***** ***** am happy to assist you with your enquiry.

I ama fraid that if your parents do remain living in the property, for Inheritance tax (IHT) purposes, HMRC will see this as a gift with a reservation (ie the party making the gift retains the benefit of it), and will still treat your parents as owning the property when calculating the value of their Estate for IHT purposes.

Making such a gift is therefore seen as a scam, and won't benefit you or your parents whatsoever in reducing their potential IHT liability.

Unfortunately, there are no magical ways of reducing IHT liabilty on any property, if your parent swish to remain living there.

I hope this assists and answers your question.

Kind Regards

Al

Customer: replied 2 years ago.
Hi Al
Thank for your reply,
My parents would not live in the property they gift to me.
They have a property abroad and half of the year they will live there.
As I own a property Which I will vacate in order to live in the house my parents gift me alone with my family. The property that I will vacate I will gift to my sisters, who in turn will let my parents live in it half the year.
Sorry I just wanted to make sure you clearly understood what I was saying, we are in no way trying to scam HMRC , merely my parents planning for inheritance tax.
Expert:  Aston Lawyer replied 2 years ago.

Hi Ralph,

Apologies- I thought your parents would remain living in the property they currently own.

From what you have said, such a gift from your parents to you would indeed reduce their Estate for IHT purposes, provided they both survive for 7 years or more from the date the gift is made. Such a gift would be seen as a potentially exempt transfer, and once 7 years has elapsed, none of the value of the property would be classed as forming part of your Parents Estates for IHT purposes.

If they were to die within 7 years from the date of the gift, taper relief applies which means a portion of the value of the property would still be treated as forming part of their Estate, depending when during the 7 year period they died.

I hope this assists and apologies again for my earlier reply.

Kind Regards

Al

Customer: replied 2 years ago.
Hi Al
Yes thank you I am aware of what you have pointed out and thank you for re clarifying. However, I just want to make sure that me gifting my property to my sisters is not considered as an associated operation? Perhaps I've been reading too much into it, but the idea is that because my parents are gifting me their property and , I of course want to
Live in it. Therefore rather than my sisters Have a share in it, I in effect at a later stage gift them my property which means we all get an almost equal share.
Does that make sense?
I just want to know there is nothing untoward going about it this way .
Expert:  Aston Lawyer replied 2 years ago.

Hi Ralph,

There are no other downsides of the "triangular arrangement". As long as your parents do not become legal owners of the your propery, which isn't going to happen, then the gift of their property to you will exempt it for IHT purposes after 7 years.

Kind Regards

Al

Customer: replied 2 years ago.

Hi Al

Apologies for not getting back to you. Ok I guess that answers my question. Have you come across this type of an arrangement?

Expert:  Aston Lawyer replied 2 years ago.
Hi Ralph,
Possibly a couple of times in 20 years!
However, as long as your parents vacate their existing property, they will be fine provided the 7 years elapses.
All the Best
Al
Expert:  Aston Lawyer replied 2 years ago.

Hi Ralph,

If you are happy with my Answers, I would be grateful if you could leave

positive feedback.

Thanks

Al

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