When a gift is made to another person, the donor of that gift must give up all benefit from the gift for it to be registered as a ‘true’ gift for Inheritance Tax (IHT) purposes.
If the donor retains some benefit from the gift, eg. a parent who transfer their house into the names of their children, but continues to live in the property rent-free, the value of the house will remain in the parent’s estate and will not save on IHT due to the anti-avoidance provisions. This is called a ‘gift with reservation of benefit’.
For advice on any Tax issues, Folkes Worton are here to help on 01384 376964
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Folkes Worton – Accounting for the Future