Published on: 4th September 2023

Why you shouldn’t put your house in your child’s name / children’s names

There is a lot of misleading information out there detailing ways to minimise Inheritance Tax (IHT) or to protect your home from care fee assessment. The most common “solution” clients ask about is “gifting” the family home to their child / children by transferring the property’s ownership into the child’s name / children’s names.

As a homeowner, you are allowed to give your property to your child / children, even if you are still living there. However, there are some things you should be made aware of before proceeding down the route of signing over the ownership of your family home.

If you transfer the ownership of your property into your child’s name / children’s names, you will no longer be the legal owner. This could ultimately then result in:

• You being forced out of your home by your child / children due to a fall out / disagreement.
• Your child / children deciding that they want to sell or rent out the property.
• Your child / children deciding that they want to live in the property themselves.
• If your child / one of your children goes through a divorce, their ex-spouse would have a legitimate claim against their estate which would also include your property. Your property, or part of it, could be lost to your child’s divorce settlement.
• If your child / one of your children were to go bankrupt, then the property could be sold to pay off the debt.
• If your child / one of your children were to pass away before you then your house would be (partly) owned by the beneficiaries of your child’s Will ~ which might be your daughter-in-law or your grandchild / grandchildren.
• If your child / one of your children were to pass away before you then your house would be (partly) owned by the beneficiaries of your child’s Will ~ which might be your son-in-law / daughter-in-law or your grandchild / grandchildren and if inheritance tax (IHT) was due the executor(s) of your child’s estate might decide to sell your house to pay the IHT.

As a parent, it is a natural instinct to want to help your children throughout their life, but this can also sometimes lead to unwanted consequences. On the surface, gifting your property to your child may seem like a win-win situation, but those considering this should be well aware of the risks of doing so.

The other issue to consider if your aim is to save on IHT is that gifting your property to your child / children can actually still result in an IHT liability. This is referred to as a “gift with reservation of benefit” (GROB). A GROB occurs where, for example, a parent gifts their home to their child / children and then continues to live in the property. In this example and under those circumstances, the parents are then said to have reserved a benefit in the gift (property) and, as such, it will be treated as part of their estate on death, even if it was gifted to the children more than seven years prior to their death. This means that you could gift your property to your child, but still end up paying IHT upon your death.

Before deciding to give part or all of your family home to your children or other family members, 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.

======================================

If you wish to give instructions or require general information about our Wills, Lasting Powers of Attorney, or Trusts then we will carry out a telephone or Zoom appointment.

However, if you wish to give instructions to one of our Consultants and you feel that you can only do this at a Face to Face meeting then we are offering, at our Consultant’s discretion, a limited number of Face to Face appointments in most of the areas we normally cover. To see the areas we normally cover please click here.

To arrange an appointment please telephone 01732 868190 or click here.

======================================

Back to all news