This is a question that I hear on a weekly basis at the very least. Should I sign my house over to the kids to avoid Inheritance Tax or Care Fees. My advice to this question is always the same….do not make any decision before seeking professional qualified advice. Here are a few points to consider if this has ever been a question on your mind….
Once the property is signed over to another party, it will then become part of their estate and you will lose control of it.
• If you fall out with your children you could be evicted.
• If you children go through a divorce, your son/daughter’s ex-spouse would have a legitimate claim against their estate – which includes your property.
• If your son/daughter became bankrupt – the house would form part of their estate and could potentially be claimed and sold by creditors to pay their debts.
If you continue to live in the property after you have transferred it, the house will remain part of your estate on death, even if you live beyond seven years.
You can avoid this by paying rent to your children – however this must be market rent and your children then bear the burden of having to declare this income to HMRC for Income Tax purposes.
When a property is not a ‘Principle Private Residence’ any increase in value from the date of the transfer to the date of sale will need to be accounted for and liable to Capital Gains Tax.
For example, if you transfer your property to your children when it’s value is £100,000 and your children then sell the property 10 years later for £200,000, if your child/children are not living in the property, they will need to pay capital gains tax on the increase in value of £100,000.
Transferring your property to your children could be seen by the council as an attempt to conceal your assets to avoid paying for care fees. This is called a deliberate deprivation of assets and if found to be the case, the authority can reverse the transfer and will still include the property for assessment.
No-one has a crystal ball unfortunately and unfortunately we cannot prevent people from dying unexpectedly or becoming seriously ill. If you outlive your children – the property will then then pass to their chosen or default beneficiaries.
There are a number of ways in which you can ensure your children/chosen beneficiaries can inherit your property without the need to sign it over to them during your lifetime. Signing the house over to the kids involves a lot of financial, tax and emotional implications and as such, you must always seek professional and qualified advice before making any decisions. If this is something you have considered, or have discussed with someone you know, please do not hesitate to contact me to discuss the options available to you. Tel Carolyn on 0800 610 1131.