Gift with reservation of benefit?

Dear all, if a child lives with a parent as their main residence, and the parent gifts half of the property to that child (just a child and one surviving parent) the gift is without reservation of benefit, and although a PET, after 7 years falls out of the parent’s estate. Apologies for lack of statute details here! The parent does not need to pay market rent etc., and there is no absolute minimum time the child needs to be living there for the gift to be effective, although the Revenue will ask for a lot of proof, such as council tax and sharing bills, to justify a gift of this type.

If the child, 17 years later, goes into care for 2 years, at which point the parent dies, will the Revenue treat the initial gift as a GWROB and want the whole value as part of the parent’s estate? The exit by the child is one to do with health matters, but will the Revenue treat this in this way? Many thanks in advance.

You appear to suggest that following the gift of 50% to the child with the parent remaining in occupation there is no GWR. This would be so if, as you seem to suggest, the let-out in
s102B(4) IHTA 1984 is satisfied.

For the section to apply the donee (ie child) must not cease to occupy the property. The issue therefore seems to be whether on going into care age 17 constitutes ceasing to occupy. Was the child’s absence from the property only temporary? Did the child ever live in the property after going into care?

If occupation by the child did cease then on the parent’s death the 50% interest given away will be dragged back into the parent’s estate for IHT purposes one death.

Malcolm Finney

Hello Malcolm, thank you for the reply. It seems certain that s102B(4) IHTA 1984 is satisfied. The son continued to live with dad for 17 years, but 2 years ago the son went into care and has not returned back yet. So on the face of it, the property is solely occupied by dad and has been for 2 years, but the care element is the issue that clouds the GWR I think - or is this very definitely a GWR, and the half gifted 17 years ago ha snow come back to dad? The executor could make an IHT400 application with all the facts and plead that there is no GWR - do you think this is the best way forward? Otherwise the Revenue may find out about this later and leave the estate/son etc. with future issues.

Seems to me like a GWR. Prima facie, donee ceased to occupy. S 102B(4) breached,

Malcolm Finney

Thank you for your responses Malcolm.

Before giving up hope, I would try the strategy of declaring the position on the IHT 400. However, it would help if the child retained his possessions in the property with a view to returning. This would support the argument of retaining occupation, particularly if he has visited ‘home’ albeit not returned to stay.

Thanks Haroon, and I agree the 400 approach is good - at least it gives a chance for the Revenue to san no. The property does not need to be in continual occupation for this to work, and we need to get all the finer points re home visits and is the son still paying for the upkeep, and other things etc. I guess it is one of those things that has not been challenged in court a lot or at all, so when does the occupation revert back? Many thanks.

When it comes to the shared percentage arrangements in property what proof do HMRC ask for to see its being upheld and when do they ask for it ?