What is a gift with reservation of benefit?
A gift with reservation of benefit is a gift you make but continue to benefit from — most commonly giving a house to children while still living in it rent-free. For inheritance tax the asset is treated as though you still own it, whenever you die.
The consequence is that the seven-year clock never starts. Survive twenty years and the property still sits in the estate at its date-of-death value.
The recognised exception is paying a full market rent to the new owners, reviewed regularly and actually paid. That fixes the inheritance tax position but creates income tax for the recipients, so it rarely helps overall. Where the gift is not caught as a GROB, the pre-owned assets tax charge may apply instead.
There is a capital gains tax sting on top: the children take the parent's base cost with no uplift on death, and the property is not their main residence, so a gain that would have been washed out entirely by death becomes chargeable. It remains the most commonly attempted and most reliably counterproductive piece of DIY estate planning.