Gifting in Wills
Released On 22nd Jan 2024
We are often asked can I gift my house to my children. The simple answer is yes you can, but the more important question is, “what are the consequences of doing so?” and “is it wise to consider this?”
With the value of most property increasing year on year, but the Inheritance Tax threshold not being increased, together with the rising cost of residential and nursing home care, we are always being approached by clients who see gifting their own property to their children as a way of solving all their tax and care concerns. Many people however are not aware that there are certain disregards when assessing support for care. The upper capital limit for self-funding of care increases as from October 2025 and many do not consider the potential pitfalls in such an arrangement until it is too late to rectify.
Things to consider:
Gifting your own home should be a last resort due to potential pitfalls.
Only a small percentage of people will end up needing care and if this is the case the value of a home is assessed for care purposes if not occupied by a spouse or qualifying relative.
The introduction of the residence nil rate allowance benefits married couples intending to leave property to their children by increasing all tax allowances to a potential £1 million.
You would not be able to remain living in your house if you gifted it without paying rent as outright gifting is essential to avoid Reservation of Benefit Rules, and for the gift falls outside the estate for tax purposes if the giver survives for over seven years.
If sole purpose behind gifting is avoidance of care home fees, deliberate deprivation of asset regulations may be imposed by local authorities, affecting intended outcomes.
Often overlooked are the consequences for Capital Gains and Stamp Duty Tax implications for the parent giving and the child receiving the gift, especially when the child already owns a property.
Future uncertainties, such as business failure or marital issues, can impact the intended benefits of gifting.
Whilst this can be beneficial in some circumstances, considerable care needs to be taken and professional advice sought before making any decisions. There are often many safer and more tax efficient ways of passing over of funds.
For information on the preparation of Wills, Lasting Powers of Attorney, probate and related matters contact Tim Leat on 01308 801108 tim.leat@battens.co.uk
By Tim Leat
