Inheritance laws of UK - Gift with Reservation as Anti Avoidance Rule.

The purpose of anti-avoidance rules, particularly concerning gifts with reservation of benefit (GWR), is to prevent individuals from exploiting loopholes in tax law to avoid paying the appropriate amount of tax. Specifically, in the context of GWR, the aim is to ensure that individuals cannot transfer assets to others while still enjoying the benefits of those assets themselves, thus avoiding inheritance tax (IHT).

Now, why someone would want to transfer a property to their children through a lifetime gift while still using it themselves, there could be several reasons:

1. Estate Planning: By transferring assets during their lifetime, individuals can reduce the size of their estate for inheritance tax purposes. This can help mitigate potential tax liabilities upon death, ensuring that more of the estate passes to beneficiaries rather than being subject to taxation.

2. Protecting Assets: Transferring assets to children or other family members can be a way to safeguard those assets from potential creditors or legal claims in the future.

3. Planning for Long-Term Care: In some cases, individuals may transfer assets to their children to ensure that they qualify for means-tested benefits or support for long-term care without having to deplete their assets.

4. Family Dynamics: Some individuals may wish to pass on assets to their children during their lifetime to see them benefit from the assets or to help family members with financial needs or opportunities.

However, the key difference between using assets oneself without transferring and transferring assets with reservation of benefit lies in the tax implications.

If an individual retains some benefit from the asset after transferring it, such as continuing to live in a property they have given away, it may be subject to inheritance tax upon their death.

By contrast, if they continue to use the asset without transferring it, they may avoid triggering certain tax consequences associated with lifetime gifts.

Therefore, the decision to transfer assets with reservation of benefit should be carefully considered in light of the potential tax implications and legal consequences.