Q&As

A person wishes to sell their home to their daughter and son in law, but wishes to continue living at the property. How can the arrangement be structured so as to give the seller security of occupation, while avoiding the value of an interest in the property falling within the seller's estate for inheritance tax?

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Published on LexisPSL on 12/04/2021

The following Private Client Q&A provides comprehensive and up to date legal information covering:

  • A person wishes to sell their home to their daughter and son in law, but wishes to continue living at the property. How can the arrangement be structured so as to give the seller security of occupation, while avoiding the value of an interest in the property falling within the seller's estate for inheritance tax?

It is assumed that

  1. the person who is selling the house is selling the whole legal and beneficial interest to the buyers

  2. the sale price for the house represents the open market value of the house, so that there is no element of gift to the buyers

The seller will share occupation of the whole property with the buyers, rather than occupying it alone or occupying a distinct part only, such as an annexe.

The sale of the house and continued occupation would not be caught by the reservation of benefit provisions in section 102 of the Inheritance Tax Act 1984 (IHTA 1984), because IHTA 1984, s 102(1) requires that, for the reservation of benefit provisions to apply, 'an individual disposes of any property by way of gift'. If the sale proceeds were less than the open market value, IHTA 1984, s 102 may be in point.

Assuming that this is a sale for full open market value, it is unclear why a restriction should be registered against the title to protect the seller's occupation. If the buyers are paying full market value, it would be reasonable to assume that they should be free to deal with the property as they wish. If the buyers were to give the seller the right to be consulted abou

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