This question raises an issue that I’m often asked about as many people believe that anything given away before death, such as a holiday home to children, will avoid inheritance tax. This is not always true.

For a gift not to be included at death in the value of the assets of the person making the gift, two things must happen. Firstly the gift giver must survive for at least 7 years after making the gift, and secondly they must not retain any benefit from the gifted item. So if you give your holiday home to your children you would not be able to continue to stay in the holiday home unless you pay your children a commercial rent for doing so! Otherwise it would be regarded by H.M. Revenue & Customs as a “gift with reservation of benefit", and still included in the value of all you own after your death. Even if you stopped using the home for at least 7 years after giving it away, and then started using it again, the value of the home would still be regarded as part of your estate for inheritance tax purposes at the time of your death.

You also need to be aware that if it has gone up in value since it was originally bought or inherited, then when you transfer ownership to your children you would probably get clobbered for capital gains tax even if, for inheritance tax purposes, you were regarded as still owning it – a “double whammy!” as they say.

I welcome your queries on inheritance tax and capital gains tax. You can write to me at timesquestions@anvoner.co.uk and I shall do my best to put your mind at rest.