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A woman who transferred her home to her daughters in 2012 still lives there and says she cannot afford market rent. Tax adviser Heather Rogers says that continued use without market-rate rent may mean the gift is treated as a gift with reservation of benefit, leaving the property subject to inheritance tax in the mother’s estate. Whether any tax is due depends on the estate’s value, available allowances and the specific facts; taking ownership back is not automatically the answer.
A woman who transferred her home to her daughters in 2012 may still face an inheritance tax (IHT) assessment on the property because she has continued living there without paying market rent, tax adviser Heather Rogers says in a response published by This Is Money. The woman’s husband died in 2024, and she asks whether the daughters could owe tax when she dies and whether she should take the property back; the information provided does not establish the value of the estate or whether any IHT bill will be due.
The woman said she and her husband transferred ownership of their house to their daughters through local solicitors because her husband thought this would make matters easier for them after the couple’s deaths. She remains in the property and pays the bills, but says she could not afford to pay her daughters rent at the going market rate. Those details matter because the IHT treatment of a lifetime gift can depend not only on who legally owns an asset but also on whether the person who gave it away continues to benefit from it.
Rogers explains that a lifetime gift is generally a potentially exempt transfer, or PET. For a gift to fall outside the donor’s estate for IHT, the donor generally must survive seven years after making it and must give up the benefit of the asset. If someone gives away a home but continues to live there as before without paying market rent, the arrangement may be treated as a gift with reservation of benefit (GROB). In that case, Rogers says, the property may still be counted in the donor’s estate for IHT despite the legal transfer.
Rogers says a donor who gives away a home but continues living in it would generally need to occupy it as a tenant and pay the new owners market rent throughout the period of occupation to avoid a reservation of benefit. Her response also lists a tenancy agreement, rent taxed as income for the recipients, periodic rent reviews, updated wills and formal gift documentation among steps that may be relevant. These are points from the adviser’s explanation, not a determination of this family’s tax position.
Why Continued Occupation Matters
The case highlights a gap that can arise between legal ownership and tax treatment. Transferring a home’s title to children does not necessarily remove its value from the parent’s estate if the parent continues to occupy it and has not made an effective, unconditional gift. For families considering or already using such an arrangement, the cost of market rent and the practical consequences of giving up ownership can be as important as the hoped-for IHT saving.
The amount, if any, payable cannot be inferred from the fact that a home was gifted. Rogers notes that the standard IHT nil-rate band is £325,000 per person, and that a qualifying residence nil-rate band of up to £175,000 per person may be available when a home is left to direct descendants, subject to the rules. Whether those allowances apply, and the total taxable estate after debts and other assets are considered, is unknown here. The daughters’ own potential exposure and the mother’s possible estate assessment also depend on the precise legal and financial facts.
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The Gift and IHT Rules
Rogers says the seven-year rule is often misunderstood in discussions about giving a family home to children. A PET may become exempt from IHT after the donor survives seven years, but that does not by itself resolve a reservation of benefit. If a donor keeps using the gifted property without paying market rent, the asset may remain within the donor’s estate under the GROB rules. Rogers adds that if market rent stops later, that may trigger the issue from the point rent ceased; the exact application would depend on the circumstances.
The residence nil-rate band is separate from the standard allowance. In Rogers’s account, it can add up to £175,000 per person when an eligible residence, or qualifying assets under downsizing rules, is left to direct descendants. A property need not be the deceased’s home at the moment of death, but it must meet the relevant conditions and be included in the estate or qualify through downsizing provisions. The source does not provide enough information to establish whether this woman’s estate would qualify for the allowance or whether her daughters would owe tax.
Rogers also describes the pre-owned asset tax as a possible separate issue in some arrangements, including cases where gifted cash is used by children to acquire a home for the donor to occupy. That example is not stated to match this family’s circumstances. The reported question gives no property valuation, details of the transfer documents, rent history, estate assets or advice from the solicitors who handled the 2012 transaction.
“Gifting the family home to remove it from your estate is very risky, and as a rule it is not something we would advise a client to do.”
— Heather Rogers, tax adviser, in her response to This Is Money
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The Family’s Tax Position Is Unknown
The report does not state the home’s value, the size of the woman’s wider estate, whether she pays any rent, or what the 2012 transfer documents say. It also does not establish whether the daughters have treated the property as landlords, whether a tenancy agreement exists, or whether other circumstances affect the arrangement. Without those facts, it is not possible to calculate an IHT liability or say that a bill will be “enormous.”
It is also unclear whether transferring ownership back would improve the family’s position. The supplied response explains general rules and risks but does not provide a final, tailored conclusion about this household or confirm that the transfer should be reversed. Any tax treatment would depend on the full facts and relevant professional advice.
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Review the Transfer Before Acting
The next step raised by the report is to establish exactly what happened in 2012 and how the house has been used since. The woman and her daughters would need to review the transfer paperwork, ownership records, any rent or tenancy arrangements, the property’s value and the mother’s wider estate. A qualified tax adviser or solicitor can assess those documents against the gift-with-reservation, PET and residence nil-rate band rules.
Until that review is done, the source supports neither a prediction that the daughters will face a particular bill nor a recommendation to return ownership. The family’s tax position remains unresolved, and any decision about rent or title could carry legal, financial and tax consequences.
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Key Questions
Could the house still count in the mother’s estate for IHT?
It may. Rogers says that if someone gives away a home but continues living in it without paying market rent, the gift may be treated as a gift with reservation of benefit, leaving the property within the donor’s estate for IHT. The report does not determine how the rules apply to this family.
Does surviving seven years make the gift exempt?
Surviving seven years can be relevant to a potentially exempt transfer, but it does not by itself remove the reservation-of-benefit issue. Rogers says a donor who continues to benefit from a gifted home may still have it counted in their estate.
Would paying rent change the position?
Rogers says the donor generally needs to pay the recipients market rent for the whole period they continue to live in the gifted property, with a tenancy arrangement and rent reviewed as market levels change. Whether that is suitable or sufficient in this case requires advice based on the actual arrangement.
Should the mother take ownership back?
The supplied report does not say that she should. Reversing a property transfer may have legal and tax consequences, so the family would need advice based on the transfer documents, current ownership and the mother’s full estate.
Will the daughters definitely owe inheritance tax?
No definite bill is established. The property’s value, the mother’s other assets, available allowances and the applicable tax treatment are not provided. The report raises a possible IHT issue rather than confirming a liability.
Source: rss
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