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Marlene Blower
Posted: 03 April 2014 19:47:53(UTC)
#1

Joined: 03/04/2014(UTC)
Posts: 2

Can anyone advise? Is it too late to gift our property to our children? I am relatively fit but my Husband has Motor Neurone Disease which is classed as a life limiting illness. Any help on this matter would be very much appreciated. Thank you.
jeffian
Posted: 04 April 2014 18:51:53(UTC)
#2

Joined: 09/03/2011(UTC)
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Marlene,

As ever with these questions, a full answer requires much more information but I am assuming that by "gift" you mean a gift to avoid Inheritance Tax (IHT) by making a Potentially Exempt Transfer (PET) and, secondly, I am assuming that by "our property" you mean the home you live in as your Principal Residence.

The quick answer to PET's is you can give away any of your assets and they will become PET's for 7 years from the date of the gift at which point they will be completely outside your estate. If you die before the end of the 7-year period, the impact of IHT is tapered.

So far as your home is concerned, it is very difficult to "gift" it if you continue to live in it yourselves or get any benefit from it. This would be known as a 'gift with a reservation of benefit' in which case it won't be exempt from IHT and will be added to your Estate for IHT purposes, even though the ownership may have been transferred to your children. Look at this site -
http://www.hmrc.gov.uk/i...ss-home-to-children.htm
The only way that you could convince HMRC that there was no 'reservation of benefit' would be to pay to your children, from the date of the gift, the full market rental value for the home you have given them but for most people this is not possible unless you have very substantial income to cover it.

Inheritance Tax currently kicks in at £325k for an individual and a combined £650k for a married couple. Gifts between husband and wife are IHT-exempt. A common arrangement would be for each partner in a marriage to gift their estate to the other on death (i.e. no IHT payable on first death), with the resultant combined estate going on the death of the second partner to the children who would be hit by IHT on anything above £650k. In any event, do make sure that both you and your husband make wills. People often assume that they don't need to and it will all go to the kids anyway. If you die without making a will ("intestate"), this is NOT the case!

I must stress that I am no expert and you should take advice from a solicitor and/or accountant with specific knowledge in this field. Whilst it is very difficult to create a successful PET with your own home, one thing I am looking into myself is the possibility of raising an interest-only mortgage, repayable from the proceeds of sale of the house on our deaths and giving the cash to the children as a PET. In simple terms, if you had a house worth £1m, raised a mortgage of £350k and gave them that sum now, when you died your Estate would be £1m less the mortgage debt to be repaid, i.e. £650k and therefore outside IHT. Of course, you'd need to pay the mortgage interest during your lifetimes and it may well be the equivalent of renting your house anyway! As I say, I haven't been into it in detail yet.

Anyway, the 'must do's' at the moment are -
1) take professional advice and
2) make wills if you haven't already done so.
2 users thanked jeffian for this post.
Alan Selwood on 04/04/2014(UTC), noiansleft on 04/04/2014(UTC)
Alan Selwood
Posted: 04 April 2014 19:44:37(UTC)
#3

Joined: 17/12/2011(UTC)
Posts: 3,379

A good answer, jeffian!

The key here is to take urgent independent specialist advice, have up-to-date wills that do what you want them to do, and listen to hints and tips, but avoid doing anything too complicated that appears to bend the tax system (these days, HMRC treat almost anything that reduces the tax take as tax avoidance/evasion and will attempt to treat any tax-reduction devices as invalid unless they are in the statute-book, like £3000 p.a. per donor IHT gifts, PETs where you have survived for 7 years, and so on).

Members of S.T.E.P. are likely to be the most experienced at knowing how to handle such cases for the best.

Marlene Blower
Posted: 04 April 2014 20:10:08(UTC)
#4

Joined: 03/04/2014(UTC)
Posts: 2

Hello Jeffian - thanks for your response. However, we will not fall into the IHT bracket in any event but were hoping in some way to lessen the burden of possible health care in the future. We are in the process of completing new Wills but I wished to try and get this matter sorted firstly. Thank you again.

jeffian
Posted: 04 April 2014 21:44:27(UTC)
#5

Joined: 09/03/2011(UTC)
Posts: 954

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That's why I said one always needs more information, Marlene. Turns out I was answering the wrong question!

I don't know what happens if you dispose of assets to avoid healthcare costs. I'm sure others may be able to answer that.

I'm glad to hear you're dealing with the wills. Such an important thing that so many overlook.

Best of luck to you both.
Alan Selwood
Posted: 04 April 2014 23:28:48(UTC)
#6

Joined: 17/12/2011(UTC)
Posts: 3,379

Have a look at this thread on
http://forums.moneysavin...howthread.php?t=1912891
especially the comment made by 'monkeyspanner' on 2/9/2009.
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