Daughter has recently moved in with parents PPR (value approx. £1.5m). She likely to stay indefinitely. Total estate approx. 2.4m so over RNRB taper. Gift of other land to be made shortly which with the potential gift of part of the PPR brings estate sufficiently below £2m.
IF.
Each parent gifts 1/2 of their share so they each own 1/3rd. If daughter pays 1/3rd of bills etc = no GWR, just PET (s102). Correct?
Could the gift be so daughter owns 1/2 the property and she pays 1/2 the bills. Would this still avoid GWR or pushing it too far?
If gift half the house to daughter then separate off the property so two distinct properties (to be separately registered) would this be a feasible option? I’m not as comfortable with this approach but any thoughts/experiences appreciatively received.
I am mindful of the liability to IHT and where that will fall if the proposed PETs fails.
In relation to a ‘shared occupancy’ gift under s102B(4), FA 1986, I take the approach that the parents are one capita and the adult child another, so would be comfortable with gifting up to 50% of the property to the daughter. You obviously need to think about IHT if the gift fails and balancing up under the Wills if there are siblings etc. Daughter does not need to pay her way, it is best if parents pay the lion share of the expenses. Daughter must not pay more than her share rather than the other way round.
The DoTAS guidance makes it clear that parents retaining a small percentage would be challenged but 50% clearly is not small.
I would not favour the splitting of the property over the above as it sounds difficult from a practical point of view unless there is a natural separation ie. an annex or something similar.
Thank you Camilla, that is useful to know re: parents as one Capita. The planning has been delayed due to Covid but I am mindful of the IHT balancing required albeit that will need some careful thought.
Re daughter receiving a share from parents and moving in with parents I see no problem with the %s mentioned. As Karl points out DOTAS Guidance seems to have no problem:
“The analysis might be different where the donor only retained a very small proportion of the property in comparison to their level of occupation”.
Retention by parents of 67% or 50% is by no means a “very small proportion”.
Probably better for parents to continue to pay all expenses as less of a likelihood of challenge by HMRC.
Not sure of position if part of house hived off as to whether GWR becomes in point (ie daughter deemed to have moved out).
Small point of mathematics: gift of 50% by each parent of their 50% share means each parent retains 1/4 (not 1/3) and daughter then owns 50%. If each of the three are to each own 1/3 then each parent gives 1/3 of their 50% (ie 1/6). I think !!!.
Thank you both. I realise this post was sometime ago but clarity on one point you each make would be appreciated. It seems I was under the mistaken impression that the daughter should pay AT LEAST her share of the expenses whereas you say only her share at the most and even better if the parents continue to pay these themselves. Why is that?
Following a gift of part of a property where the donor continues to reside in it (and so does the donee), to preclude the GWR provisions from applying to the gift the donee must only pay an appropriate proportion of total expenses such that the donor doesn’t benefit from making the gift. Thus, the donee must not pay more than her share; to ensure this doesn’t happen, it’s often suggested that the donor continues to pay all the expenses as was no doubt the case before the gift.
This also reduces the quantum of the donor’s overall estate thus saving IHT on death.