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Sam
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Category: Tax
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My wife and I own a one-bed leasehold flat in which our son

Resolved Question:

My wife and I own a one-bed leasehold flat in which our son has lived since purchase. We wish to gift him the property but are concerned that at 75 and 76 now we may either not survive a further 7 years or that in some stage in the future be obliged to enter a care home in which case a care provider may try to seize the property to pay towards care costs.
The property in question is currently worth around £125K. Our own home is worth about £350K and other assets a further £300K approx.
Your thoughts would be appreciated.
Submitted: 10 months ago.
Category: Tax
Expert:  Sam replied 10 months ago.

Hi, Sam here , one of the UK tax Experts here on Just Answer, thank you for your question and I shall reply shortly

Expert:  Sam replied 10 months ago.

Hi

Thanks for your patience -

I feel anything you do at this stage could jeopardise entitlement of any care home fees you may need, as even if you are in reasonably good health at this time - the government are not too kindly if they feel there could have been a deprivation of assets.

However from an Inheritance tax point of view, whilst a potentially exempt gift does need the full 7 years before disregarded for Inheritance tax , if you survive between 4 and the 7 years then some of it is disregarded on a taper relief basis

The 7 year rule

If there’s Inheritance Tax to pay, it’s charged at 40% on gifts given in the 3 years before you die.

Gifts made 3 to 7 years before your death are taxed on a sliding scale known as ‘taper relief’.

Link here that advises what % is that remains liable to tax

https://www.gov.uk/inheritance-tax/gifts

Scroll down to the 7 year rule

Also be mindful that if each of you leave all the remaining estate to the other that not only does this then NOT attract use of the NIL band and create no Inheritance tax charge that then the surviving parent then gets their exemption limit and their late spouses ( so £325K x 2 = £650,000) so this would mitigate a substantial amount too

Plus gifts up to £3000 per year can be made exempt under the gift rules, and I have added this link that lists all the exemptions

And if you made no gift last year then this £3000 can be carried forward once so you can make gifts up to £6000 this year

https://www.gov.uk/inheritance-tax/gifts

Real under the gifts section

So there are many ways to chip a bit off here and there - and it all helps !

I would recommend you go and see a solicitor who specialises in Inheritance tax, his time would be worthwhile to set up a plan for you to follow to benefit from every opportunity there is along with consideration of a trust for the home which again can save money - but do check the costs to run the trust and fow hoe long you would need it in place.

Let me know if I can assist further

Thanks

Sam

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