You might choose to gift property to your children to ensure that they are financially secure in the future or to reduce the amount of inheritance tax (IHT) owed on your estate when you die, or to make sure your home is excluded from your estate for the payment of care home costs – whatever your reasons for gifting property to your children, making this decision can be beneficial for you and your loved ones.
However, it’s important you speak to a specialist solicitor who has experience of estate planning, about the best way to gift property to your children to ensure your gifted property provides the maximum benefits and there are no hidden surprises.
Key Considerations When Gifting Property
Make It A True Gift
Naturally, you have the freedom to gift your children any of your assets during your lifetime. However, if you want to gift property as part of your IHT planning then you must make sure the gift is a genuine one and you don’t benefit from it or HMRC will classify it as a GROB (gift with reservation of benefit).
Any gift that is seen to have benefits, such as a parent gifting their children their home but not moving out, will be considered a GROB and part of the estate by HMRC – and therefore liable to IHT. This is because, by continuing to live in the home HMRC will argue that the parent is benefiting from living rent-free – some of the options to prevent this from happening include moving out or agreeing to pay a fair rate of rent to the children.
Be Happy In Your Decision
It’s vital that you’re certain you want to gift property to your children and fully understand the implications of doing so.
Should you decide to continue living in the property after gifting it, you should be aware that the property is no longer yours and this security has gone – if your children are declared bankrupt or decide to sell the property or to rent it to someone else, you would no longer be able to stay in the property and would need to find somewhere new to live.
There are other scenarios that can happen that you might not be happy with in the future. For example, if your children die before you, the property becomes part of their estate and passes to someone according to the wishes within their Will or to the rules of intestacy, which may not be what you want to happen to the property.
It’s worth noting that a gift is legally binding and cannot be changed once made, unlike a Will which can be reviewed and updated as your situation changes.
Care Home Costs
When it comes to care home costs, the law is complicated and the local authority sometimes still includes gifted property within their assessment calculations, depending on the structure and timing of the gift. You should consult legal advice before gifting property to your children to make sure the property is excluded from your estate and does not form part of the care home costs assessment.
Helping You To Gift Property To Your Children
We are here to make sure you can plan for your future in the most beneficial and effective way possible, and this includes structuring any gifted property to your children to ensure maximum benefit for you all.