L owns number 30 and number 30A. He and his wife live in number 30 and number 30A is rented out to tenants (30A - the freehold is owned by L and his wife G, a 999 year lease has been granted on it to L who in turn rents it out). Rental income is something like £100k+ per annum.
G is L’s second younger wife - she has no children and they are both close to his children from his first marriage. Unusually, they are also both close to his first wife.
L wishes to leave 30 and 30A on life interest trust to G, remainder to his children and grandchildren. He is also keen not to pay huge amounts of IHT - he would rather give it to charity then to HMRC - he has a separate charitable trust.
G is keen to keep the income.
Am I correct in understanding that
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There would be no IHT on L’s death and there would be a CGT uplift.
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G could surrender e.g. 90% of her interest in 30A advancing it to the children whilst retaining the income in full.
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There is no gift with reservation of benefit (GROB) as the donor doesn’t occupy the land (section 102B(2) and (3)(a), Finance Act 1986 (FA 1986)
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The gift would be a PET and after 7 years would not be taxable on her death.
I know you can gift the majority of a property and keep the rent if you do not occupy it, I am not sure what if any impact the trust would have on this.
Miriam Spero
Phillips Lewis Smith