What Are The Problems That May Arise From

[Stargazer]

giving my house to my two adult children in order to avoid inheritance tax? I live on a pension and have very little savings but my house just comes into the inheritance tax bracket although it cost olny £19,000 when we bought it? I have a feeling that it is not as straightforward as I thought it would be.

[Gizmonster]

you need to be careful as it's not straight forward.
If you give the house to your children and they don't charge you rent at the market rate, it's classed as a "gift with reservation of benefit" and it and won’t be exempt from IT.
https://www.gov.uk/inheritance-tax/inheritance-tax-planning-passing-on-property

[Gizmonster]

More here:
http://www.hmrc.gov.uk/inheritancetax/pass-money-property/pass-home-to-children.htm

[bednobs]

if it only just falls on the IHT bracket, there won't be much iht to pay as it's only charged on the amount OVER the threshold

[bednobs]

also, if you fall out, they could turf you out!

[cathfromsaron]

they could argue, chuck you out or predecease you!

you only pay tax on the portion over a certain amount, and this keeps changing!

get financial advice!

[factor-fiction]

I don't know your circumstances but if you were married and your spouse has died then his/her allowance should have transferred over too giving you an IHT allowance of around £650000.

[spotit3]

I once thought of this and was advised to,consult a solicitor. His advice was, 'Don't do it'! He warned me that if sometime in the future my children were married, then split up and got divorced their other half would then be entitled to a share of the house.

[sandyRoe]

If you had to go into care it might be thought that you'd disposed of an asset in order to avoid paying for it.

[Barmaid]

You need to seek legal advice from someone who specialises in this area (try a solicitor who is member of the Probate Section of the Law Society or who is a member of STEP). There are ways of achieving it, but you have to be really careful. One of the biggest problems is if you transfer it to your kids absolutely and one of them goes bankrupt, you stand to potentially have it sold. There are SO many problems that you need to look at how much your estate will save in IHT and whether the savings are worth the risk.

[FredPuli43]

You are not in the category of people for whom this is either worthwhile or likely to avoid the tax. If you were currently living in a vast house worth, say, £5 million, and downsized to a modest one nearby while gifting the big house to a child who might need the space, then it would be worthwhile. You could easily show that you had retained no interest in or use for the big house. But in your case, remembering 1) that the tax is only levied on the difference between the threshold and the value at death and 2) the tax is payable in ten yearly instalments, if you wish , it is never going to be worthwhile.

[VHG]

Note you only pay IT on anything OVER £325,000, not on all of it.

So if your total estate was say £350,000 you only pay IT on £25,000 of it.

Also, as has been said, if your husband/wife died and did not use their IT allowances then you actualy dont pay IT on anything OVER £650,000.

[Peter Pedant]

BM and FP are right
follow their advice

fraught with problems.

basically no one ever does this now-a-days