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Why are you thinking of putting it into trust for the benefit of the children, rather than simply transferring it out right? Are you thinking that they will sell it and you don’t want that? Would you be retaining any interest in the property?
Remember that there are 2 lots of inheritance tax allowance here . If of you dies and passes the estate to the other, then as there is no inheritance tax between husband and wife, it doubles the threshold on the eventual death, to £650,000.
I am familiar with the inheritance tax provision of lifetime transfers what I was asking was why you are not transferring the property now instead of creating a trust.
In the event of the double allowance for inheritance tax, the seven-year rule applies on the second death, not the first.
If you keep control of the property, the revenue will treat it as a “gift with reservation” which is not a gift and treated as though the transfer never took place.
The advantage of transferring the property now is that after seven years it the disadvantage is the children could sell it and spend the money.
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I do not know what happened there. The advantage in transferring the property now is that after seven years, it is free of the IHT liability. The disadvantage is that the property belongs to the children and they could sell it and spend the money.
From the revenue point of view, they can always argue that you put the property into trust rather than did an outright transfer, because you want retain control. That is a gift with reservation and there is an argument that there was no real intention to give the children interest but it was damn to simply try to avoid IHT. If you transfer the property outright with no reservation, then it is very difficult and in fact almost impossible for the revenue to argue that this was not a genuine transfer.
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Yes, it doesn’t matter whether the deaths occur.
Why are you retaining 50%? That’s the question the revenue would ask and if it is to exercise some control, then it’s a gift with reservation. The revenue may not pick it up but that’s the situation.