Under these new proposals, someone looking to minimise IHT may look to give away their family home to their child whilst they are alive. If the child is agreeable and a market rent is paid they may still have a right to live in the home. Provided they survive 7 years there will be no IHT to pay on death on the family home. The residence nil-rate band can then be used to help minimise IHT on the rest of the deceased’s estate.
By not linking the new residence nil-rate band to the value of the deceased’s property on death, or within a defined period of death, means the new proposals are just a way of enhancing the IHT nil-rate band on the overall estate.
Another area of concern is that the new residence nil-rate band rules apply to direct descendants only. This seems more akin to forced hiership and contradicts the principles of the English and Welsh legal system which allows people free will to select their beneficiaries.
Rachael Griffin, financial planning expert, Old Mutual Wealth:
“This seems a very generous proposal and means people can benefit from an enhanced IHT allowance even if they don’t own a property. The restrictions around who can benefit from the new proposals also seem very archaic in this modern world, where not everyone marries or has children.”
“These extra rules will make estate planning even more complicated for people. A far simpler approach would have been to enhance the IHT allowance for everyone, and not try to link it to a property they currently or previously owned, and not try to limit it to direct decedents.”