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bigduckontax
bigduckontax, Accountant
Category: Tax
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Experience:  FCCA FCMA CGMA ACIS
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Can I grant a life tenancy to my son for the flat he occupies

Customer Question

Can I grant a life tenancy to my son for the flat he occupies in my house
Submitted: 3 years ago.
Category: Tax
Expert:  Aston Lawyer replied 3 years ago.

Hello and thanks for using Just Answer. I am Al and am happy to assist you with your enquiry. Just so I am clear, could you confirm who lives with you, if anyone in your house? The Flat- is this just an annexe to the main house? Does your Son live on his own and why in particular would you like to grant him a life tenancy? Thanks AL

Expert:  Aston Lawyer replied 3 years ago.
Sorry,

The above was an information request, as opposed to my Answer!

Kind Regards
AL
Customer: replied 3 years ago.

I live with a partner. on the ground floor and plan to grant her a life interest in the flat we share.. My son lives on the top floor. I wish to devalue the property in order to reduce their inheritance tax after my death..

Expert:  Aston Lawyer replied 3 years ago.

As this is more for tax purposes, I will opt out and one of my fellow colleagues will assist.

Kind Regards
AL
Customer: replied 3 years ago.
Relist: Incomplete answer.
I did not receive any kind of answer, but several questions; one of which asked me my motive for asking. Whereupon your expert 'opted out' on the basis it was a 'tax question'.
Customer: replied 3 years ago.

Aston Lawyer replied he has opted out. Do you have anyone who will answer my question?

Expert:  Nicola-mod replied 3 years ago.
Hello,

I am going to put this into the Tax category now and hopefully one of our tax Experts will be able to assist you.

Please don't reply to this as it will send the question back to me and you may experience further delay.

Thank you,
Nicola
Expert:  bigduckontax replied 3 years ago.
Hello, I'm Keith and happy to help you with your question.

It is perfectly feasible, but it has the following effect. Your son will receive the gift free of any tax, it's outside the scope of tax. However, he will be deemed to have received the property at the market value as at date of transfer. He will then be liable to Capital Gains Tax (CGT) on the ultimate sale by him although if he lived in the flat it would be his sole or main domestic residence and he would be entitled to Private Residence Relief which would relieve him of any tax on any gain made.

Now as far as you are concerned the gift would create a Potentially Exempt Transfer (PET) for Inheritance tax (IT) purposes. This PET lasts for 7 years tapering year by year. Its effect is that the value as at your demise within the period would be added back into your estate for IT purposes. If your estate was insufficient to meet the IT liability then the tax would cascade onto your son for immediate payment. The solution is, of course, a decreasing term life insurance policy to protect the position. You would need to have an estate in excess of 325K before IT kicks in at 40% flat rate on anything over. If you are married and your spouse predeceases you then depending on the amount of the their 325K remaining would cascade to you giving a possible 650K relief if his estate were small.

You should have a competent, local solicitor draw up the deeds which should include access, mutual repairs, individual responsibilities etc. I live in Scotland where such arrangements are the norm.


I do hope I have been of help to you.
Expert:  bigduckontax replied 3 years ago.
Sorry, my answer is incorrect, I failed to notice the words life tenancy. Such an estate in land is an equitable interest in land under the Law of Property Act, 1926. It would revert to you, or rather your estate on his demise so it would not reduce then value of your estate at all, which was the aim of your question. Indeed, it might increase it with rising property values. My answer is correct if you gave it to him. You might like to re-think your ideas and just gift it instead.
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 4416
Experience: FCCA FCMA CGMA ACIS
bigduckontax and other Tax Specialists are ready to help you
Expert:  bigduckontax replied 3 years ago.
Thank you for your support.
Customer: replied 3 years ago.

Helpful advice

Expert:  bigduckontax replied 3 years ago.
Delighted to have been of assistance.
Customer: replied 3 years ago.

Please don't keep sending me your emails. My partner used you and I don't know why you are writing to .

Expert:  bigduckontax replied 3 years ago.
Because if I don't the question clutters up my question list. If you could be so kind as to close it then this nuisance would cease.