Considering Gifting the Family Home?
Many clients come to see us with a view to transferring their home to their children or loved ones during their lifetime with a view to avoiding having to use the value of their home to pay for care in the future.
However before doing so you should be aware of the following ten reasons why it may not be the best for you or your family:
1. Death – if the recipient were to die before you, your home will be an asset of their estate and will pass in accordance with any Will they have made or the intestacy rules applicable on their death which may mean the home is left to someone other than you.
2. Divorce – if the recipient is subject to divorce proceedings then your home may be considered a matrimonial assets and may lead to the loss of your home
3. Bankruptcy – if the recipient were to become subject to bankruptcy proceedings, your home may be seized by the Trustee in Bankruptcy to settle debts due to creditors.
4. Future borrowing – as you will no longer be the legal owner of your home, you will not be able to use the capital value of it to release funds should an unexpected cost arise.
5. Life style – if the recipient has a drink, drugs or gambling habit, they could use the capital value of your home to fund their addiction which my see the security of your home disappearing
6. Capital Gains Tax – if the recipient owns their own home and doesn’t live at your home, then they may not be able to claim the “Main Residence Exemption” when they come to sell.
7. Inheritance Tax – regardless of who the owner of the property is or when it was gifted, if you are still living in the property at the date of your death, your estate will still be liable to pay the inheritance tax on the value of the property at the date of your death.
8. Family disagreements – if you fall out with the recipient then there is a possibility that they could apply to have you evicted from your home.
9. Standard of care – if by gifting your home during your lifetime you leave yourself sufficiently short of funds to pay residential care costs then it will be for the local authority to fund your care and they will decide which residential home it is you live in.
10. Care home fee avoidance – if it can be shown that an individual has deliberately deprived themselves of capital in order to avoid the need to sell a property to pay for care charges or to avoid the value of a property being taken into account in means testing then you could be in breach of the anti-avoidance measures which may result in the property value still being taken into account.
However, we can provide advice as to other options available that may be more beneficial to you and your family and you should contact the Private Client team on PrivateClient@southernslaw.co.uk.