#YODO – Giving Away Your Home to Your Children

For various reasons, older clients often consider giving away their home to their children.  The burden of looking after the home may be too much, or you may want to ensure that the property passes to your children before you die. You may also have concerns about the property being vulnerable to financial abuse or wish to prevent it from being sold to pay care fees.

Whilst there may be a number of reasons for giving the property away, it can also be problematic.

Once you have given away your home, it is no longer yours. You have no legal right to live in the property, and no control over when it is sold or what happens to it. You will be relying on the goodwill of your children to allow you to continue living there.   Whilst you may be on good terms with your children now, this may not always be the case; you may fall out with them or they may come under financial pressures which force them to make unexpected decisions.

By giving your home to your children, it will become entirely their asset. It will be taken into consideration if they get divorced or are declared bankrupt, and a court may order that it must be sold. Equally, if your children die before you, it will pass in accordance with their Will and may end up in the hands of in-laws, grandchildren or other third party beneficiaries.

For clients with higher value estates, despite giving the property away, it could remain part of your estate for Inheritance Tax purposes. If you continue to live there, the ‘7 year rule’ does not apply and your family may be landed with an unexpected Inheritance Tax bill after your death.

If you require long-term care from the Local authority, your finances will be assessed to determine whether you should paying towards the cost of that care. If they consider that you have deliberately deprived yourself of an asset in order to qualify for financial assistance, they can treat you as still owning that asset. Unlike with Inheritance Tax, Local Authorities are not subject to any ‘7 year rule’ and have the power to look back indefinitely at any such transactions.

One alternative to ensure that your property passes to your children is to gift the property into a trust, either during your lifetime or in your Will. The trust would give you a right to occupy the property but it would ultimately be owned by the trust. Whilst this can still be challenged by the Local Authority if it is done deliberately to avoid paying for care, it can help to overcome some of the problems associated with an outright gift.

9-15 May 2016 is Dying Matters Awareness Week. None of us like to think about dying, but not talking about it won’t make it go away. Dying Matters #BigCoversation and #YODO (you only die once) seeks to encourage us to talk more openly about dying – it could be one of the most important conversations you will ever have. As part of Dying Matters Awareness Week, we will be posting a daily blog addressing some important issues surrounding death and planning for the future.

Our Wills, Probate, Tax and Trusts team can give you professional advice tailored to your personal circumstances, to help you plan for the future and ensure that your affairs are in order. Should you require any further information, please contact Lorraine Wilson in our Wills, Probate, Tax and Trusts Department on freephone 0800 975 2643 or send any question through to Forbes Solicitors via our online contact form.


This entry was posted in Wills, Tax, Trusts and Probate.