Introduction

A gift with reservation (GWR) arises when an individual makes a gift of their property to another person but retains some or all of the benefit of owning the property. The legislation defines a gift with reservation with reference to ‘enjoyment of the property’. If possession and enjoyment are not effectively transferred, then regardless of legal ownership, the property is taxed as part of the estate of the donor.

The purpose of the GWR provisions is to prevent a taxpayer from reducing the value of their estate subject to IHT whilst at the same time continuing to benefit from the property given away. Often a client’s initial approach to inheritance tax planning will be to put a significant asset, usually their home, ‘in the name of’ a child or other eventual beneficiary under the misapprehension that it will remove the asset from their estate for IHT purposes. The GWR provisions mean that the asset is still treated as part of their estate on death.

The term ‘gift with reservation’