A couple of caveats to lifetime gifts
Something you should be aware of are gifts that HMRC consider to be a gift with a reservation of benefit. This would be the case where the legal ownership is changed, but you continue to use the asset as if it were still in your name as before. A typical example would be if you made the transfer of your family home, but continued to occupy the property without paying a market rent - you have made the gift, but retain the benefits of ownership of the property.
There are ways to overcome this, one would be to pay a market rent for your occupation, another may be to live alongside your child in the house and transfer just half of the property. Where HMRC consider there to be a reservation of benefit, the asset will fall back into your estate for IHT purposes, regardless of how long the gift is survived by. Learn more about lifetime gifts here.
Another issue to be aware of when giving assets away in your lifetime is the potential for the pre-owned assets tax (POAT) to be applied. This can apply where the donor gives away an asset, but subsequently benefits from the asset given away.
It will not apply where the asset remains in the donor’s estate where a reservation of benefit exists. This may be the case where the donor provides funds for the purchase of a property that they later reside in. The POAT rules impose an income tax charge annually on the value of the benefit enjoyed by the donor. In terms of a property, the charge would be based on the annual rental value.