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Living with daughter and passing on house to her

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  • Living with daughter and passing on house to her

    My apologies in advance if this is the wrong forum, but the question is about inheritance planning.

    I have two daughters. I want to pass on some money to them in the most tax-efficient manner possible.

    I gave the younger one a sum of money about a year ago to help her buy a house. I live with her and her husband and two children now, and I pay lodgings to avoid "gift with reservation". The house she bought was worth about 2.5 times what I gave her, so most of the rest is mortgaged. Now, I have to undertake to live for 6 more years so she can avoid inheritance tax. I'll do my best! She and her husband both work, and bring in a respectable income between them - though if I died, they may find it hard to pay inheritance tax on the money I gave them.

    I would like to do the same for my second daughter, but she is much less well-off. She would be unable to substantially inflate what I can give her from her own resources. The amount I can give would be enough to buy a modest house outright, but because 40% of the money would be payable in tax if I should die within the first 3 years, going down 8%/year after that, she would only be able to spend 60% of the amount initially, because the rest would be at risk. She could possibly spend a further 10% which she could manage as a mortgage if I should die in the first 3 years. Would I be able to buy the house in my own name and go live there with her, then leave the house to her as my only residence on my death?

    Are there any gotchas?

    * Would she be able to live with me rent free if it was just the two of us in the house (or possibly just pay the council tax)?
    * How about if she got a boyfriend who wanted to live with her?
    * If she married before I died, then inherited the house, would a covenant protect her in case of the dissolution of her marriage, or would it become joint property on her marriage? Should the requirement for such a covenant be written into my will?

    My thanks to anybody who can answer.
    Tags: None

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