A client of ours wanted to check if she was able to give her nephew who intended to moved to London half of her property. Our client is a single lady with no children and wanted to know if she should give her nephew half of the property now or leave it to him when she died. She also wanted to know the inheritence tax implications.
Generally lifetime gifts are classed as potentilly exempt transfers and so are not chargeable to inheritence tax providing the transferor does not die within seven years of the transfer. However if the transferor continues to benefit from the gift then it is known as a gift with reservation of a benefit In such circumstances the gift is treated as having remained in the transferor’s estate and so could be liable for interhitence tax on their death depending on the value of the estate.
Exceptions to this rule mean that if you can satisfy certain condiitons, a liftime gift of 50 per cent of the property to a nephew may not be liable to inheritence tax upon death.
This means the nephew and our client should occupy the property jointly and our client should not charge him rent. There should not be any benefit fromthe gift and that means the costs of such things as the household utility bills, and other maintenance costs need to be split.
Providing our client does not benefit from the gift after seven years it will not form part of the east and will not be subject to inheritance tax.