In this episode of Listen Without Prejudice, Nicholas Barlow, Head of Private Client at Bishop and Sewell, and Luke Jenkins tackle one of the most common questions in inheritance tax planning: can you give your home away to your children whilst still living in it?

The conversation reveals why this seemingly simple solution rarely works as intended. The hosts explain the concept of "gift with reservation of benefit," legislation from 1986 that prevents people from sidestepping inheritance tax by transferring property deeds whilst continuing to live there rent-free. Despite no longer owning the property, the value remains frozen in your estate on death, potentially creating nasty surprises for executors and even forcing children to sell the home to pay unexpected tax bills.

However, Nicholas and Luke explore several legitimate strategies that can work when properly implemented. These include paying full market rent to your children throughout your lifetime with professional valuations reviewed annually, genuine co-occupation arrangements where children move in to provide care, downsizing and gifting the surplus cash, and gifting a small share of the property to secure co-ownership discounts of 10 to 15 per cent.

The hosts highlight important risks including that rental payments must continue for your entire lifetime, children receiving rent must pay income tax, care authorities may view transfers as deliberate asset deprivation, and new owners face potential complications from divorce or financial difficulties. Proper documentation including tenancy agreements, declarations of trust, and updated insurance becomes essential.

Throughout the discussion, Nicholas and Luke emphasise that whilst inheritance tax planning through property gifting is possible, it requires professional advice to navigate successfully. This episode is essential listening for homeowners considering inheritance tax planning. 

For tailored advice, Bishop and Sewell's Private Client team is available at bishopandsewell.co.uk or via LinkedIn.

Chapter Markers:

(00:00) - Introduction and Overview of the Podcast

(00:42) - Meet the Experts: Nicholas Baller and Luke Jenkins

(00:58) - Gifting the Family Home: The Classic Question and Disappointing Answer

(01:18) - Tax Implications: Understanding Gift with Reservation of Benefit

(02:58) - Rental Agreements: Paying Market Rent and Keeping Proper Records

(04:04) - Care Costs and Deliberate Deprivation of Assets Concerns

(04:36) - Successful Case Studies: When Rental Arrangements Work Well

(08:47) - Inheritance Tax Allowances, Co-Ownership Discounts and Alternative Strategies

(11:07) - Summary: When Gifting Works and the Risks to Consider

(11:46) - Closing Remarks and How to Get in Touch

Useful Links

Connect with Nicholas Barlow on LinkedIn

Reach out to Luke Jenkins on LinkedIn

Visit the Bishop & Sewell Website