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Sam, Accountant
Category: Law
Satisfied Customers: 14157
Experience:  26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
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Hi,My question is regarding my freehold property (value

Customer Question

My question is regarding my freehold property (value £1m) which I am thinking of leaving to my 5 children to avoid IHT what is the best way to do this??.
In addition rather than gifting the property to the kids can I just put their names on the land register so when I pass away my share goes to the 5 kids and if one of them pass away their share goes to the remaining 4 kids etc...
Submitted: 3 years ago.
Category: Law
Expert:  Sam replied 3 years ago.
Thanks for your question, which has been transferred to UK tax. I am Sam and I am one of the UK tax experts here on Just Answer.
I am Sam and I am one of the UK tax experts here on Just Answer.
Even the act of putting the childrens' names on the deeds will be treated by HMRC as a gift, as you are legally changing the ownership of this property which triggers a consideration for capital gains and future Inheritance tax.
I assume this is your home, and if so, then any transfer will NOT trigger capital gains liability as this is fully covered by private residence relief. So this would not seem to be an issue.
But for Inheritance tax, when a share of the property is transferred/gifted it can only be treated as a potentially exempt gift if
1) you no longer benefit from use of it - or pay market value rent and
2) more than 7 years lapse from the date of making the transfer/gift, so that it then can be disregarded for Inheritance tax purposes.
if you do not pay market value rent, then for Inheritance tax purposes this will be treated as a gift with reservation of benefit which means that its full value is still included in your estate at the time of death, and HMRC seek taxes due on re owned assets
Link here regarding the position on pre owned assets
The best way you can take matters forward is either
1) Gift it now, and pay market value rent to the children and if you survive more than 7 years then the gift ceases to be considered for Inheritance tax
2) Gift it now, but move into another property, and after 7 years the property is disregarded for Inheritance tax.
Even putting the property in trust still would see rental income needing to be paid, for this property to be disregarded for Inheritance tax, but then you also have trust income tax to consider, so is not always a cost effective move,
If, of course this property is NOT your main residence, then please advise and I can provide additional information.
Do feel free to ask any follow up questions