Think twice before giving away your home!
Clients often ask whether it is worth signing over their home to their children in an attempt to mitigate against Inheritance Tax and care home fees later on in their lives. On the face of it, it seems quite simple; arrange for the Land Registry to update the title register so that your children’s names appear on the register instead of yours and continue to live there the way you always have. Even better, there will be no need to worry about probate on your death as the property will already be in your children’s names. Sounds like a perfect plan, what could go wrong I hear you ask…
Here are some of the many points you might want to consider before embarking on this seemingly cunning plan:
- Inheritance Tax: You must outlive any significant gift made in your lifetime by seven years for the gift not to have an effect on the Inheritance Tax position of your estate on death. If you have retained any benefit in the asset given away, such as continued use of the asset, the value of the gift will be brought back into your estate for Inheritance Tax purposes – whether or not you have outlived the gift by seven years.
- Care fees: If you ever need to be assessed by the local authority for care home funding you will be asked to disclose significant gifts made in the past. No matter how long ago you gave your home away, depending on your circumstances around the time the gift was made, it could be brought back into account when calculating the value of your assets for care home funding as you may be deemed to have deliberately deprived yourself of assets to reduce your liability to pay for care.
- Perhaps the most important point to consider, Control: When you give your home away, even if you continue to live there, you are completely beholden to your children and their circumstances. If a child dies, divorces, goes bankrupt, falls out with you or their siblings you will have no control over what happens to your home, leaving you potentially homeless.
Of course, some people transfer their property to their children and encounter none of these problems – they may never need care and their estate may not be subject to Inheritance Tax. If you are considering transferring your home to someone else, seek advice first as it might turn out to be a pointless exercise or, more likely, there could be a less risky way of making plans to cover or mitigate against exposure to Inheritance Tax and care fees.
For advice on Inheritance Tax please contact Charlotte Nock in our Private Client Department.
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