POAT or Gift With Reservation (GWR)

Good Afternoon Hive,

We are looking at a case with the following circumstances and wondered if anyone could tell me whether POAT or GWR applies.

Mother and Father, Father passed away and the Mother was advised to sell the family home, give the money to her Daughter who then used that money to purchase a home in which they both lived.

The Mother passed away four years after the Gift was made and the amount in question is £700,000.

The Mother never paid any rent or anything whilst residing in the family home and as far as I am aware, no other gifts were made.

What we are trying to establish is if GWR or POAT applies, we are of the mind that GWR applies, but want to seek the Hive's assistance.

Thank you in advance.

Comments

  • My initial thinking is that there is a GWR in respect of half of the value of the property and also acts as an interest in possession.
    My reasoning is from considering a slightly different perspective.
    Let's say Mum owns the family home post Husband's death valued at £700,000.
    The daughter moves in and lives in the home as her main residence. Mum can make a gift of half the home (a 7 year PET) and this is, as I understand it, perfectly OK if the daughter is contributing to the running costs and no one needs to pay rent.

    In essence, this is what has happened albeit with a cash transfer first. A 'cleaner' course of events would have been for Mum to have bought the new property first and then gifted half to daughter.

    Thus I think 50% of the gift is OK; 50% is a GWR and as Mum has had the benefit of the asset I think it comes back as 50% of value of the house (as Mum clearly had an interest in possession), not the value of the 'failed' gift.

    I don't believe POAT applies as the gift falls into IHT making it exempt from POAT.

    Nathan, I could (probably am) be very wrong on this and this is one for a specialist STEP qualified / property / probate experienced solicitor.

  • NathanNathan Member

    Richard, thank you so much for taking the time to reply, our thoughts were similar, so it goods to have some degree of consensus. But as you say we will seek further assistance to get a concrete answer. Thanks again.

  • Would be interested to hear what your further enquiries come up with as regards answer.

  • NathanNathan Member

    Owing to some further information, we came to the conclusion that it does fall under POAT.

    "Given the order of the ‘gifts’ and the mother not living in the house straight away

    It would fall under POAT – how she would adjust the tax returns and determine the interest payable is very subjective"

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