Inheritance Tax: Can You Gift Your Home To Your Children

There are some limitations you need to know about.

• Gifts with benefits

  In order to erase your Inheritance Tax liability, the gift must be made with 'no strings attached'. If it does have conditions attached, or you continue to live there, it will be known as a 'gift with reservation of benefit', and so it still remains in your estate.

• Renting it back

  You can stay in your home once you've gifted it to your children, however, you have to pay rent at the market rate. Doing this ensures no Inheritance Tax is due on your death, but remember, you must live in it for at least seven more years once you've gifted it.

  Your children may have to pay Income Tax on the rent they receive from you. Pay less rent than the market rate, and your home remains in the estate and subject to IHT.

• Moving in

  Should your children move in with you once you've gifted it to them, your home remains in your estate but the Inheritance Tax can be minimised in these circumstances.

  You could think about giving your children half your home and splitting the bills evenly. The half you give them would not be subject to IHT once the seven-year limit has been reached.

• Selling it

  Should you choose to sell your home to your children, make sure it is at market rates. Sell it for less and the remaining value is classed as a gift and subject to Inheritance Tax. An example would be selling a £500,000 house to your children for just £1. The remaining £499,999 may be subject to IHT because it would be treated as a gift.