The 7 year rule in inheritance tax is when after 7 years, the gift doesn’t count towards the overall value of your estate.
This is known as the 7 year gift rule in inheritance tax.
Basically when it comes to the 7 year rule in inheritance tax there are a range of gifts that are exempt from inheritance tax.
Everything else is defined as either a chargeable lifetime transfer (CLT), which is for gifts into a discretionary trust that may be subject to an immediate 20% IHT charge (if paid by the trust, or 25% if paid by the settlor), or a potentially exempt transfer (PET) where the gift will only be completely tax-free if you live for 7 years after gifting it (assuming that the gift has been given to an individual, rather than a business or trust).
If you die within 7 years of gifting the asset, then the gift will count towards your nil-rate band, as was mentioned above, meaning that it may still be subject to IHT.
An inheritance tax is a state tax that you pay when you receive money or property from the estate of a deceased person.
Unlike the federal estate tax, the beneficiary of the property is responsible for paying the tax, not the estate.
Putting a house in trust means that when the owner of the house dies or becomes too ill and needs to be put into a nursing home then the house transfers to the person that they put the house into trust for.
For example if your parents signed you as a name on the house when it was put into trust then the house ownership would transfer to you upon your parents death.
Or when they go into a nursing home.
Then you can either sell the house or keep the house.
Trust property refers to the assets placed into a trust, which are controlled by the trustee on behalf of the trustor's beneficiaries.
Estate planning allows for trust property to pass directly to the designated beneficiaries upon the trustor's death without probate.
A trust is a legal entity that allows property to be passed from the person who created the trust (the grantor) to the person they want to pass their property to (the beneficiary).
Trustee –this is the person who owns the assets in the trust.
They have the same powers a person would have to buy, sell and invest their own property.
It's the trustee's job to run the trust and manage the trust property responsibly.
Beneficiary – this is the person who the trust is set up for.
Even with a mortgage on the home you may always place your home, even while there is a mortgage on it, in a revocable living trust.
Remember that a revocable living trust is an estate planning tool.