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bigduckontax
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 4416
Experience:  FCCA FCMA CGMA ACIS
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I need advice on inheritance tax and how to limit it

Resolved Question:

I need advice on inheritance tax and how to limit it
Assistant: The Accountant will know how to help. Please tell me more, so we can help you best.
Customer: My mother and father has a property no mortgage worth about £850,000. My father has died and it automatically goes to my mother. She wants to gift either part of whole to me. Is it better to keep her holding a percentage. We will both be living in the property.
Assistant: Is there anything else the Accountant should be aware of?
Customer: I can't think of anything else. I have been told if she gifts 100% to me then she will not be able to live there unless she pays the going rent - we don't want to do that.
Assistant: OK. To minimize me, please click the down arrow at the top right corner of this box.
Customer: what happens next
Submitted: 27 days ago.
Category: Tax
Expert:  bigduckontax replied 27 days ago.

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.

I do hope that you have found my reply of assistance.

bigduckontax and other Tax Specialists are ready to help you
Expert:  bigduckontax replied 26 days ago.

Thank you for your support.