If you’ve read our Inheritance Tax article, you may be considering gifting your family home to one of your children to avoid paying inheritance tax on it. It’s not so simple.
If you’re still thinking of having control over the property or living in it, then you may be making a ‘gift with reservation (of benefit)’. A gift with reservation is where an asset is given away but is still enjoyed by the original owner. So if you’re still to live in the family home, you will need to pay rent. Even if you’ve retained a portion of the ownership, you will need to pay rent over the part you don’t own.
You may have changed the legal ownership but retained a beneficial interest – such an entitlement would be subject to tax.