I have an estate where the Deceased gave away his interest in his farm and home in 1998 to his son. On the same day a tenancy agreement was drawn up allowing the deceased to continue to occupy the rooms in the farmhouse subject to a yearly rent.
The deceased has died this year and I wonder how much I should be enquiring about this gift as it would on the face of it qualify as a PET and more than seven years have elapsed since the death.
I would be very grateful for any comments. Thanks
A gift with reservation has to be identified at the time of death, with a retrospective over the previous 7 years to identify if the circumstances had existed during that time which would have given rise to a reservation.
The original gift will have been a PET and will have fallen out of account in 2005.
However, if the deceased had not occupied the rooms under the tenancy agreement at a full market rent throughout the 7 years immediately preceding his death, a reservation may well have arisen. This is regardless of whether he had been paying a full market rent at other times. If, say, he was paying a full market rent during 2017 but since then the rent payable has fallen below the market rent, HMRC might assert that a reservation has arisen and assess IHT accordingly.
Paul Saunders FCIB TEP
Independent Trust Consultant
Providing support and advice to fellow professionals