Can I Gift My Property to My Children to Reduce My Liability for Care Home Fees And Inheritance Tax?

One of our most frequently asked questions is whether it is possible to gift your property to your children in order to mitigate any care home fee liability or inheritance tax liability that you/your estate may incur in the future.

There are a number of reasons why you may be considering gifting your home, such as love and affection for the recipients of the gift or wanting to ensure that your children have the security of homeownership. You may be thinking about the effect that becoming your carer will have on your relative and you may feel morally obliged to provide for that person during your lifetime, or to ensure that the ongoing maintenance of the property can be carried out if age or ill health means this is something you struggle with.

Some people simply wish to simplify their estate administration upon death to take the pressure of their loved ones at an already distressing time.

Many people believe that if they gift their property to their children it is no longer considered as one of their assets. This is not always correct.

For many people, their main residence is their biggest asset and therefore it is understandable why people would wish to protect and preserve that asset as far as possible.

Can I Gift My Property to Reduce Care Home Fees?

Gifting your property to reduce any potential care home fees you may be required to pay in the future is risky.

One risk to consider is whether such a gift will be considered to be a deliberate deprivation of assets.

A deliberate deprivation of assets is when a person intentionally reduces their assets in an attempt to avoid such assets being used to pay for care fees.

There is no set timescale after which such a gift will be disregarded by the local authority. Instead, the local authority will need to consider whether, at the time the gift of the property was made, you had a reasonable expectation that you may need care, and may need to pay for that care in the future.

If it is found that you have deliberately deprived yourself of an asset, the local authority can include the value of the asset in their financial assessment and this may lead to financial complications.

Another misconception is that if a property is placed into a trust, that it will be protected from care fees, however this can also be seen as a deliberate deprivation of assets and there are also other factors to be considered such as loss of control over the property and the taxation of trusts.

Can I Gift My Property to Reduce Inheritance Tax

Gifting your property to avoid inheritance tax is another issue that we receive lots of questions about. As the main residence is such an important asset, many people wish to “gift” it to their children, but remain living in it and using it as though they still own it.

This is called a gift with reservation of benefit. This is where a person transfers the ownership of an asset on paper, but they continue to derive the benefit of the asset for themselves, as the legal owner would be entitled to do.

HMRC has very stringent rules around gifts with reservation of benefit and such gifts cannot be used as a way to avoid inheritance tax.

One way in which you can gift your property to your children is to make the gift a true gift, this would involve relinquishing all benefit and control over the property. This would be done by moving out of the property and living elsewhere, or paying the full market rent to your children (the legal owners of the property). If the gifted property was not your main residence, relinquishing control may take the form of not receiving the rental income from the property. For many people, these options are not possible, nor desirable.

Gifting property can have implications on inheritance tax if the giftor passes away within 7 years of making the gift.

If you were to pass away within 7 years of gifting a property, the property (or part of it, depending on how much time had passed) would be treat as though you were still the legal owner at the time of your death, and depending on the value of your assets, this could push you into inheritance tax, or increase your existing inheritance tax liability. This is known as “notional capital.”

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Other Reasons to Exercise Caution When Gifting a Property

You should consider what would happen to the property if the person you gifted it to encountered financial difficulties. This could mean that the property would be swallowed up by creditors, and if you were intending to remain living there, you could potentially be left without a home.

Similar concerns arise if the recipient of the property went through a divorce, and the property was taken into account in the divorce settlement. There is the risk that the property could be lost to a former spouse of the person that you gifted your home to.

If the recipient is in receipt of means tested benefits, the receipt of a significant asset, such as a property, is likely to affect their entitlement to benefits and this may have a negative effect on the recipient’s quality of life/lifestyle affordability. It also may mean that the recipient has unintended stamp duty consequences (such as loss of any available first-time buyer incentives) should the recipient purchase a property of their own in the future.

There are other ways in which you can ensure that your property passes to your children upon your death, or that you can rely on assistance from those you trust to assist you with managing and maintaining your property.

Should you wish to discuss estate planning and lifetime gifting, please contact us and we will be happy to assist and advise you further.

Contact our Estate Planning Solicitors today for advice

At Thornton Jones Solicitors, our specialist Private Client team provides clear, practical advice on all aspects of estate planning.

We can assist you with:

• Drafting and updating your Will to ensure your wishes are clearly set out
• Advising on inheritance tax planning and ways to protect your estate for future generations
• Setting up and advising on trusts to manage and safeguard assets
• Preparing Lasting Powers of Attorney (LPAs) for health, welfare, and financial decisions
• Structuring your estate to support asset protection and efficient distribution
• Advising on the appointment and responsibilities of executors and trustees
• Reviewing your assets to ensure your estate is accurately recorded and properly organised

Estate planning can be complex, particularly where family circumstances, tax considerations, or asset structures require careful thought. Our team provides tailored legal advice to help you plan with confidence and clarity.

To speak to our friendly Estate Planning team, please call 01924 290 029 or contact us using our online enquiry form.

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The content of this blog post is for information only and does not constitute formal legal advice and should not be relied upon as advice. Thornton Jones Solicitors Limited accepts no liability for any such reliance upon this content. Where the post includes links to external websites, Thornton Jones Solicitors Limited accepts no responsibility for the content of such sites. Any link to a third-party website should not be construed as endorsement by Thornton Jones Solicitors Limited of any content, products or services which are outside our direct control.