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Why you should take advice when attempting to mitigate Inheritance Tax

View profile for Nadine Wealands
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A recent case involving a mother and daughter, Norma Gibbons and Dawn Gibbons, highlighted the fragility of relationships and the importance of getting good solid advice when making decisions that may well affect your future. 

The background

Before the birth of Dawn's daughter, she and her mother Norma had been living together in upstairs / downstairs converted flats in London. But following a supposed campaign of torment by Norma, they found themselves in a bitter battle with regards to the property's ownership.

Dawn was accused of coercive behaviour and with tricking her mother Norma into transferring the property into her daughter's name, this was done in 2004 as a gift with the main purpose of avoiding inheritance tax.

It now stands that 83-year-old Norma is being evicted from her home with the Judge having found in Dawn's favour. The property, purportedly worth £1.4m, no longer belonged to Norma as she had, the judge ruled, gifted her property to her daughter (with the help of a solicitor).

What went wrong with the plan?

So what exactly went wrong and how can this be avoided following this decade long battle?

It was shown that Norma had freely gifted her share in the building which was previously in joint names into Dawn’s sole name with the aim of removing the tax burden from Norma's estate. Oddly enough the decision was made without consulting with her daughter.

After an altercation with Dawn's young child, there followed a period of accusations made against Dawn, Norma made false complaint calls to police and a lengthy campaign in which Norma harassed her daughter, deliberately damaged the property but then refused to allow works to be carried out to fix any problems. This ultimately led Dawn to seek the help of the Court to intervene in the form of Court orders which Norma ignored.

Dawn had exhausted all avenues and had no other choice but to pursue the matter through the courts. Norma declared that her daughter had “tricked her into transferring the flat to her daughter” but this was rejected by the judge.

Even though Dawn pursued her matter through the courts, her mother did not cease her campaign and so with Dawn, with nowhere else to go, served an eviction notice on Norma.

Norma proclaimed that if she had known she was going to be kicked out of her home she would not have transferred it to her daughter and had expected to stay there for life.

What does this teach us about trying to mitigate inheritance tax?

This case clearly highlights the importance of estate planning, seeking expert advice and that with any significant decision should come careful consideration both financially and emotionally.

Whilst the idea of ‘offloading’ assets to the next generation seems like a good idea, one has to have regard for the implications from a legal perspective, a tax perspective and the effects it will have on all concerned.

In this case neglecting to secure good sound advice and discussing with those involved resulted in the agreement/arrangement collapsing and left a family relationship in tatters.

Whilst this is a warning to anyone wanting to off load assets to mitigate tax, it should not prevent one from doing so, as with the proper advice such arrangements are and can be successful.