In the realm of inheritance tax planning in the UK, understanding “Gifts with Reservation of Benefit” (GROB) is essential, particularly for families in South West London or Putney. This rule can often be misunderstood, especially when property owners wish to gift property while retaining personal use. As a Putney inheritance tax consultant with expertise in GROB rules and estate planning, I help clients navigate these complexities.
Let’s dive into what GROB means, when it applies, and how it might affect your inheritance tax liability.
What Is Gifts with Reservation of Benefit (GROB)?
Gifts with Reservation of Benefit (GROB) is an arrangement where an asset, like a property, is gifted to a family member, but the donor retains some benefit from it. HMRC closely monitors GROB arrangements to prevent inheritance tax avoidance. If a GROB applies, the gifted asset remains in the donor’s estate, increasing potential inheritance tax implications.
Examples of GROB include:
- Transferring ownership of a property to a child while continuing to live rent-free in the property. Here, GROB applies because the donor retains a benefit.
- Covering expenses, such as utility bills, on the gifted property could still imply retained benefit, keeping the asset within the estate for inheritance tax purposes.
GROB and Inheritance Tax: Key Considerations
Understanding GROB is crucial for effective inheritance tax planning, especially for clients in South West London or Putney estate and inheritance tax planning clients. Here are the primary considerations:
- Inclusion in the Estate: When GROB applies, the property remains part of the donor’s estate for inheritance tax, despite ownership transfer. This could impact inheritance tax planning in London, particularly for property gifts.
- Avoiding GROB: To avoid GROB, the donor must relinquish all benefits and control of the asset. For example, if gifting a property to your child while living in it, you’d need to pay market rent to avoid GROB implications. Consulting with a tax advisor for inheritance planning near Putney can help clarify these rules.
- Exceptions to GROB: GROB does not apply to assets where the donor retains no benefit, such as gifting cash or shares without retaining control. This can be a valuable strategy for families seeking to avoid inheritance tax on non-property assets.
Practical Example
Consider a typical scenario: A parent gifts their Putney home to their child but continues to live there without paying rent. According to GROB rules, the property’s value would remain in the parent’s estate, potentially increasing inheritance tax liability.
To avoid this, the parent would need to pay market rent, making the arrangement commercially fair and effectively removing the asset from their estate after seven years. For help structuring such arrangements, consult a Putney-based tax advisor for families or an expert tax advisor in South West London for guidance.
Related Blog Recommendations
For further insights into inheritance tax and rent-free arrangements, see our blog Do You Need to Charge Rent to Family to Avoid Inheritance Tax? Read it here.
To explore how gifting property might impact capital gains tax and GROB, check out our next post, Capital Gains Tax When Selling a Family Property. Click here to continue reading.
Need Guidance on Inheritance Tax Planning in South West London?
Effectively managing inheritance tax and understanding GROB is essential for securing your family’s financial future. At Lanop Business & Tax Advisors, we provide personal inheritance tax advice for families in Putney and surrounding areas, ensuring that our clients benefit from expert planning and tailored strategies.
If you’re searching for inheritance tax planning services near Putney or local inheritance tax advisors to guide you through these complex rules, get in touch. We’re here to help families plan tax-efficiently, offering peace of mind for your estate planning needs.
