Pre Owned Assets

Posted by itsdago PM | on Fri, 27/01/2012 - 15:11 221 2 comments | report

If parents gift cash to their children who then use that cash to buy a house (the cost of the house being met roughly by 50% of their own money and the other 50% being the gift from the parents) but the children then allow the parents to live there until death, rent free, would there be pre-owned assets implications on this transaction.

The parents don't need to sell their current home to satisfy the gift to their children but they will be putting it on the market if they move to the property purchased by the children. Also the children won't be living in the new home, only the parents if it makes a difference.

Many thanks in anticipation of any replies.

Comments

A problem

Paul Scholes | Fri, 27/01/2012 - 17:52 | Permalink

Hi - from memory there is only a POA implication if the parents didn't want to trreat the gift for IHT purposes as a gift with reservation. ie if they were still prepared to allow the gift into their estates on death then they are not trying to avoid IHT and so POA regs would not apply (I think).

The IHT problem here however would be halved I think if the parents & children both moved in and shared the costs.

Sorry hometime but have a look at HMRC's IHT pages, in particular this one about gifting property to kids.

Thanks for the reply. Given

itsdago | Fri, 27/01/2012 - 19:00 | Permalink

Thanks for the reply. Given the size of the estate and the information your link provided, I think it might be worth sending in the Form IHT500 to elect to keep the parents share of the property within their estate and I think that will solve the Pre Owned Assets issue. Can anyone agree or disagree with that election please.

Also if gift is from both parents is it halved and the £5000 de minimis applied to both parents individually. i..e. £5000 each based on their share of the market rent which would give a total of £10,000?