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It has generally been considered that the family home cannot be removed from the Inheritance Tax (IHT) chargeable Estate.
The Inland Revenue lost a case on appeal in the House of Lords and as a consequence an amendment to the legislation was included in the Finance Act 2002. This is quite specific, clarifies the position and prevents an exact repeat of the previous case. It also provides an opportunity in certain circumstances.
To be effective, it is necessary to make appropriate arrangements at least 14 years before death, and to be certain that you (and your spouse) will never need to move from your home.
This may not be an expensive scheme to implement, and could save 40% of the value of your home at the time of your death - £40,000 tax for every £100,000 of value. It might also protect the value of your property from being taken into account in assessing your contribution to care fees which would further increase the amount receivable by your heirs.
Unfortunately saving IHT in this way can give rise to a Capital Gains Tax liability if your heirs dispose of the property, so the plan only really works for homes expected to remain in the family.
If you contact us with a genuine enquiry, we will explain our terms for advice. We will normally provide you with a detailed explanation under no obligation, but on the basis that you will pay a fee agreed in advance if you decide to proceed. If you believe this could interest you, what have you got to lose?
See also Inheritance Tax, Inheritance Tax Trap, Interest in Possession, Joint Ownership, Giving
Reminder - disclaimer applies. Please feedback your comments. This page was last modified 28 September 2002.