Have you ever thought about giving your home to your child(ren)? Perhaps you met someone who has told you that it will save you Inheritance Tax. If your child(ren) does/do not live at home then giving away your home will not save you a penny in inheritance tax. Perhaps you met someone who has told you that it means the house will not be used to pay for care fees. That is possible but the Local Authority will probably mount a challenge. Now consider the huge disadvantages of giving away your home to your child(ren).
Did you read the story of Neville Paull in the national press recently? Neville Paull purchased his home in Hertfordshire in the early 1990s however, around eight years ago he transferred the property into his son’s name. His barrister argues that he did this to ensure his children inherit the property as opposed to his step children. Furthermore, he was concerned regarding inheritance tax and the risk of losing his home to care fees should he need long term care in the future. Mr Paull claims that he would never have transferred his property to his son without the promise that he and his partner could live there for life. However, his son is now asking him to leave the property as he requires it for his own use. The ownership of the house had, until recently, been kept secret from his other children. And whilst his son is denying claims that he exploited his father by explaining the transfer was his father’s idea, Mr Paull is asking the judge to undo the transfer and hand back his house stating that his memory of the transfer is ‘patchy’ and he had signed where his son had told him to.
If you give your home to, for example, your married child and your married child later divorces then your home will become part of the divorce settlement. Your ex son-in-law or ex daughter-in-law could own half or more of your home.
We never think about our children dying before us but it does happen. In fact, if you have an only son the chance of him dying before the age of 60 is surprisingly high at 10.1%. On his death your only son’s assets will probably go to his spouse and / or children. So your home could be owned by your widowed daughter-in-law or your grandchild(ren).
If you gift your home to your child and your child then later buys a house, your child might have to pay the “higher rate of SDLT for additional dwellings”. Furthermore, if you wish to downsize at some time in the future and your child does not live with you, your child might have to pay capital gains tax.
Before deciding to give part or all of your family home to the next generation, please contact us for advice concerning trusts. There is usually a trust that can help you achieve your wishes.
If you would like to meet with one of our Consultants to discuss any of the issues raised in this article or any other Estate Planning topic please telephone 01732 868190 or click here.