Commentary

I12.309 Private residences

IHT, trusts and estates

I12.309 Private residences

I12.309 Private residences

Partly for the reasons discussed at I12.102 above the issue of IHT planning for the family home frequently assumes great importance in the context of clients' estate planning arrangements. As most clients will ideally wish to secure an IHT advantage whilst continuing to occupy the property the application of the gifts with reservation of benefit provisions is frequently of key importance to the strategy adopted.

The application of the rules to joint ownership is dealt with in I12.304. The application of the rules can also be avoided in an unaggressive and uncontentious manner by relying upon the exemption contained in FA 1986, Sch 20, para 6(1)(a)1 for occupation of land by the donor for full consideration in money or money's worth. If an individual gives his house away and continues to occupy it for full consideration in money or money's worth, with appropriate market rent reviews every so often, then the donor will be considered to be occupying the property on an arm's length basis and the gifts with reservation of benefit provisions will not apply. Nor should there be any charge under the pre-owned assets legislation, provided care is taken to ensure that the payment is made under a legal obligation (see I12.407) and (possibly) that the amount paid is not less than the amount which would otherwise be imputed to the donor under that legislation2.

The period of risk with regard to the reservation of benefit provisions is the period of seven years preceding the donor's death

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