06: Gifts with reservation

Gifts will not reduce the IHT on your estate if you retain an interest in the property or benefit from it. An example is a parent who gives away a house to children but continues to live in it rent-free. Such transfers are called ‘gifts with reservation’. They are still counted as being in the donor’s estate for IHT. To be effective for IHT, property transferred must be enjoyed to the entire, or virtually entire, exclusion of the donor during the seven years before death.