Inheritance tax and the family home

Lifetime inheritance tax planning involving the family home can be complex and difficult. Views seem to polarise between doing nothing and doing something ‘spectacular’. As a result the middle ground that makes use of basic exemptions and reliefs can often be overlooked. The options in this neutral land are not one size fits all but they should not be disregarded.

This article aims to provide a brief roadmap to that middle ground. For illustrative purposes we will be discussing a fictional mother and her daughter but these situations can be broadly applied to anyone with a house and a trusted family member.

Tax minefield

First let’s consider the tax minefield that we must navigate. From an IHT perspective most lifetime planning relies on the gift of the family home – or cash to acquire it – being an effective potentially exempt transfer (PET). The death...