The family home will often be the most valuable asset in a client’s estate, and advisors are frequently asked if there are ways to mitigate inheritance tax (IHT) on the home while the client remains in residence.

Various anti-avoidance measures make this difficult. The principal difficulties for IHT are the gifts with reservation of benefit (GWR) and pre-owned assets tax (POAT) rules, considered further below.

Any dealings with the family home must also take account of capital gains tax (CGT) and the valuable principal private residence relief (PPR) in particular. Ideal planning will aim to preserve this as well as reducing the IHT burden, except in rare cases where the home is never likely to be disposed of.

Non-tax issues are paramount, and home owners considering a tax mitigation arrangement should be wary of any risk to their continued occupation of the property if this becomes reliant on the consent or co-operation of other family members. Therefore, any IHT planning involving the home should only be considered