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TonyTax
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15839
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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Thank you so much considered opinion regarding

Resolved Question:

Thank you so much for your considered opinion regarding "interests in possession trusts". It was most helpful.
In my last email to you I also asked if you could advise an alternative way of giving a right to occupy our property to the serving partner without causing a serious Inheritance tax problem. Is this something you could give advise on?
Thanking you again for your consideration.
Submitted: 1 year ago.
Category: Tax
Expert:  Remus2004 replied 1 year ago.
How long have you worked there please?
Customer: replied 1 year ago.
Sorry but I think you misunderstood.
This involves my partner and I giving each other " Life Interests" in our bungalow. Should I die first with my two thirds share in the property she would have the right to stay in the property for the rest of her days. When she died Inheritance tax is payable on the WHOLE property I understand. I was enquiring if there was a tax efficient way of leaving an interest to each other without causing a serious inheritance tax problem.
Thank you for your consideration.
Expert:  Remus2004 replied 1 year ago.
Sorry, wrong question. I will opt out.
Expert:  TonyTax replied 1 year ago.
As I said in another answer, if you were married at the time of the first death, the transfer into the will trust will be exempt from IHT but on the second death, the full value of the property will be included in the deceased estate. If that life interest was renounced during the life tenancy, the life tenant will be treated as having made a potentially exempt transfer which will not form part of their estate so long as they lived for seven years after making the gift. The IHT charge would start to taper away 3 years after the transfer. I'm not aware of any way of avoiding IHT where an interest exists but I'm not an expert on trusts. The gifts with reservation rules were brought into existence years ago precisely to deal with property being given away with a view to avoiding IHT but the donor continued to live in it. As I said in another answer, other trusts are subject to 10 year 6% IHT charges, though the nil-rate band does apply, and exit charges when assets are removed from a trust. A gift with reservation can be avoided if the donor pays a full market rent. I'm not sure that would work in the context of a life interest trust. A trust specialist would be able to advise on that. I hope this helps but let me know if you have any further questions.
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15839
Experience: Inc Tax, CGT, Corp Tax, IHT, VAT.
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