Posted in Case Studies
Bharat recently advised Mr and Mrs Patel. They own a property currently valued at £1,000,000 with no mortgage against the property. They have two adult children. A son who lives close by and a daughter who lives in the property.
Mr Patel wanted to give the whole property to their two children as gift but continue to live in the property rent -free.
Bharat explained that to gift the whole property and continue to live in the property rent would get the transfer caught under the gifts with reservation of benefit rules.
Bharat’s solution was to gift only 50% of the property to their two children and that they would continue to own the remaining 50% which would be transferred to their children on their death in their respective Wills.
By co-owning the property and Mr and Mrs Patel continue to pay the bills there would be no gift with reservations rules to contend with and nor would they have to pay their two children market value rent on the 50% that they have gifted to their children.
This transfer of equity solicitors will be fully effective gift for IHT purposes and Mr and Mrs Patel have immediately reduced their estate by £500,000 (the value transferred to their two children).
Bharat also advised them on other issues such as if the son did not live in the property and what would happen to the gift if the daughter decides in the future to leave the property.
They were given solutions and what steps to be taken in this case and not fall foul of this legislation exemption to the gifts of reservation of benefit rules.