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TonyTax
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15950
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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I am thinking of giving my home to my son and daughter. I am

Resolved Question:

I am thinking of giving my home to my son and daughter. I am aware of the seven year rule and the need to move out myself in order to avoid retaining an interest in possession, but I do have somewhere else to go. But to qualify to avoid IHT, in part after 3 years and completely after 7 years, do either (or both) of the recipients have to live in the property and could they sell within that time if necessary, without losing the IHT benefit? Could they for example rent the place out for income while living where they do now, without losing the IHT benefit? Is there any advantage in selling them the place for a nominal sum rather than making an outright gift?
Submitted: 2 years ago.
Category: Tax
Expert:  TonyTax replied 2 years ago.

Hi.

Your children can do what they want with the property as soon as they own it. Your estate will be liable for any IHT should you die within the seven year period and your nil-rate band will be first used against gifts made in the seven years before death in chronological order. Only if your estate doesn't have the cash to settle any IHT on the property will your son and daughter be potentially liable.

Even if you sell the property to them for a nominal sum, you will be treated as having sold it at its open market value for Capital Gains Tax purposes as you and your children are connected for CGT purposes so you may well have a liability to CGT to pay if part of the gain is not covered by main residence relief.

hope this helps but let me know if you have any further questions.

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