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Hello, I am Keith, one of the experts on Just Answer, and pleased to be able to help you with your question.
Any gift will create a Potentially Exempt Transfer (PET) in your Mother's Inheritance Tax (IHT) affairs. PETs run off at a taper over 7 years and in the event of her decease within that period are added back to her estate for IHT purposes. PETs are the first to be exposed to IHT and in the event of the estate being insufficient to meet the tax on the PET then the liability cascades down to the beneficiary for immediate settlement.
If she remains in occupation then this constitutes a gift with reservation and the 7 year period does not start until she vacates. If she pays the rack rental then this will not apply. What the new owner does with the rent is entirely up to them.
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