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Singh Family Case: Gifting Property to Grandchildren

26 Jan 2022

Posted in Case Studies

Mr and Mrs Singh who were both in their 70s were recently advised by Bharat.  They owned a property in North West London with an approximate value of £5,000,000 and there was no mortgage registered against the property.  They were concerned that there would be a substantial Inheritance Tax liability to pay on the death of them both.  They wanted the property to go to their two sons but continue to live in the property.

Bharat advised that any gift could be caught in the Gift of reservation of benefit if they gifted the property but continue to live in the property rent free.

Although the option of co-ownership was possible however given the substantial value of the property there would still be Inheritance Tax to pay.

On the Bharat’s recommendation, they decided to do the following:

  • Gift the whole property to their four grandchildren as opposed to their two sons (as they already had a substantial asset in their names
  • Agree to pay market value rent to their four grandchildren. The rent to be determined by an independent RICS valuation.
  • Continue to live in the property for the rest of their lives.

By gifting unconditionally, the whole property to their four grandchildren and thereafter pay market value rent of £20,000 per month would mean  that the gift would constitute a Potentially Exempt Transfer and not be caught by the Gift With Reservation Benefit Rules. Therefore if Mr and Mrs Singh lived at least 7 years after the transfer the property would not be  part of their estate for inheritance tax planning solicitors purposes and substantial tax will have been saved.