Gifting your House – Things to Consider

The family home is often the most valuable asset in your possession and one you want to carefully and legally pass on to others so they receive the maximum possible value.

Have you considered how this would work? The practicalities, the financial implications, and how best to achieve this for your loved ones is a subject that shouldn’t be left until it’s too late.

This article, which is based on a discussion with Georgia, one of our Wills, Probate and Trust Team, aims to cover some of the key discussion points in this topic and better prepare you when it comes to making important decisions in your future financial planning:

Why might you gift your house?

You may be thinking of giving a gift of your family home, whether this be as an act of love or perhaps for estate planning purposes.

Gifting your property during your lifetime could also mean Probate may not be required on your death, provided that you do not have any other assets that would require it.

However, there are a number of other factors to consider before making this gift, particularly if your property is your main asset.

You may find that, ultimately, making this gift may not be in your best interests or the best interests of the recipient.

What about the recipient?

It is important to factor in the circumstances of the recipient as their scenario could have a large bearing on the outcome of your property. A few examples include:

• If the recipient is married and subsequently divorces, your property may be taken into account as an asset in their divorce proceedings. This could put you in a vulnerable position if the person you intended to receive the property loses control of the asset.
• Additionally, if the person you are thinking of making this gift to encounters any financial difficulties and becomes bankrupt, their creditors could force a sale of the property which would be outside of your control.
• If the recipient is entitled to any means-tested benefits, their entitlement to this may also be affected if they become a property owner.

How might inheritance tax affect your decision?

You may have hoped by giving away your property your Inheritance Tax bill will be reduced, but this may not be the case.

Gifting your property within your lifetime may limit the potential Inheritance Tax reliefs your estate would otherwise benefit from.

Furthermore, if you were to die within seven years of making the gift, the property may still be considered part of your estate for Inheritance Tax purposes.

However, if you remain living in the property and continue to benefit from it, even if you live for more than seven years after making the gift, the value of the property would still be included as part of your estate for Inheritance Tax purposes. This is known as a gift with reservation of benefit.

In any event, your estate may not currently be liable to pay any Inheritance Tax, depending on your personal circumstances and the various reliefs available.

For these reasons, you should obtain bespoke Inheritance Tax advice before making a lifetime gift of your property. It may also be relevant for you to seek the advice of an accountant or financial advisor if there are other tax considerations.

Have you considered the impact of care fees?

If you ever need to go into a care home, your Local Authority may conduct a financial assessment to determine whether you will need to make a contribution to (or pay the entirety of) your care fees.

It’s a misconception if you have gifted your property to someone else and have no other assets or income, you will be exempt from paying for your care. There is no limit on how far back in time the Local Authority can investigate when determining your financial position.

If the Local Authority believe you have deliberately reduced the value of your assets to avoid paying for care fees, such as by making a gift of your property, this is known as deliberate deprivation of assets.

If the Local Authority concludes this, they may refuse to pay for your care. You must therefore be comfortable when making any gift of property, that the recipient may not be under any obligation to sell the property to pay for your care.

Once you have gifted your property to someone else, you will likely lose all control of the asset.

Start the discussion today

These are just some of the factors you need to consider before making a gift of your family home, and we would strongly recommend you seek bespoke advice on the consequences of making this gift before doing so, which is something we can assist with.

With decades of experience across our specialist team, book in a chat with one of our advisors today.

Start the discussion.

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