What happens if one of your adult children lives in the house with you? What are the implications for inheritance tax? What can you do about it?

Because they lived with you, and if they've always lived with you, you can give them part of your main residence without any inheritance tax issues.

You still have to live the seven years, because it's potentially exempt transfer. However as it’s a gift of part of a main residence there are no capital gains tax issues.

For obvious reasons, you shouldn't give away more than 50% of your property because if they get married and then divorced, you then have an issue yourself.

However, if they're living in the property, you don't have to pay them rent. The ideal scenario is that you have a joint bank account and you both put an equal amount of money into the property to help the costs of the property and its maintenance. Providing you do that, then you're fine for inheritance tax.

The issue would arise if that child wanted to move out. If this is a possibility the gift should not be made in the first place. If the child moves out of the property, then what are the issues? Well, it's no longer the main residence. You're still living in it and if they own half the property, you now have to pay rent to them. Make sure that you do because it has to be an arm's length transaction. We have other posts explaining what happens if you don't pay rent and it's a gift with reservation