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Peter Daniel
Partner - Head of Private Wealth
Private Wealth & Tax & Estate Planning & UK trusts, tax and estate planning
Is it possible for parents to give their home to their children and keep living there? How can you ensure this type of gifting is tax effective?
For many people, their home is one of their most valuable assets, if not the most valuable. It is therefore an obvious candidate for lifetime estate planning.
The question therefore often comes us as to whether it is possible for parents to give their home to their children and keep living there. The answer to this question is yes, but with significant caveats if the gift is to be effective for tax purposes.
Generally speaking, if you make a gift to someone and then live for seven years afterwards, the gift is completely free of inheritance tax (IHT). However, one major exception to this is that, if you continue to benefit from the asset you have given away, the value of the asset remains in your estate for IHT purposes (known as a gift with reservation of benefit, or GROB). Continuing to occupy a property you have given away is a classic example of this.
There are, however, ways in which you can make an IHT-effective gift of your home, or a share of it, to your children even though you wish to continue living there:
Another thing to bear in mind is capital gains tax (CGT). A gift of a property is a disposal for CGT purposes. Gains on your main residence are generally fully relieved from CGT. However, if you have not lived in the property for the whole time you have owned it, there is a risk that there may be some CGT to pay on the gift.
This article is part of our Lifetime Giving series. Click here to view our latest article on US/UK giving.
19 November 2021
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Partner - Head of Private Wealth
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Partner - Head of Private Wealth
Specialising in UK trusts, tax & estate planning, International trusts, tax & estate planning, Probate and US/UK Tax & estate planning
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