IHT Valuations On Gift With Reservation

Gifts with reservation should generally be avoided because the value of the gift for IHT purposes will be based on the value as at the date of death.

A gift will be a gift with reservation if it is not enjoyed to the exclusion or virtual exclusion of the donor; i.e., the donor continues to enjoy some use or benefit (e.g. continuing to live rent free in a house). If the donor still retains the benefit as at the date of their death, it will be included in their residual estate and potentially taxed at 40%.

You should also remember that the value will be based on the value as at the date of death – not the value as at the date of the original gift.