Can I Gift My Home To My Children?
As Private Client solicitors, one question we get asked repeatedly is whether you should gift your home to your children. This question usually stems from conversations in regard to inheritance tax and/or care home fees.
Gifting your home to your children can be a great way to reduce tax liabilities and safeguard your most precious asset, however it can be a complex transaction and it does not come without risks – both the practical, legal, and tax implications of any transaction of this type must be carefully considered before taking place.
What are The Tax Implications of Gifting My Home to My Children?
As a UK resident, you are entitled to your personal tax-free inheritance tax allowance of £325,000, also known as the ‘nil-rate band’. This figure takes into account your whole estate – which is any money, investments, the valuation of any property, the valuation of possessions, and the value of any gifts made in the 7 years before death. If the value of your estate is above the ‘nil-rate band’ of £325,000, inheritance tax is normally paid at a rate of 40%, however exemptions and reliefs can apply depending on your own personal circumstances.
Have You Given Any Gifts in the Last 7 Years?
As mentioned above, the value of any gifts made in the 7 years before death is taken into consideration when valuing the tax liabilities of the estate. Firstly, if you do gift your property and die within 7 years from the date of that gift, the gift will still be counted as part of your estate for inheritance tax purposes. If you survive the 7 years from the date of giving the gift, it will not be counted as part of your estate for inheritance tax purposes. However, many clients we speak to wish to gift their property on the condition that they remain living in the property for the rest of their lives. When you gift an asset but continue to benefit from it (e.g., live in the property), this is referred to as a ‘gift with reservation of benefit’ and has different tax rules. Should you gift your home to your children and continue to live in the home, when you die, the property is deemed to have never been gifted and remained in your estate and is therefore, taxed accordingly. To avoid this tax rule, you would have to leave your home forever (as if you had sold it) or pay your children full market rate rent for the duration of your residence – if this was the case, then the normal 7-year rule discussed above would apply.
What If You Are Placed In A Care Home?
If you are placed in a care home in the future, the local authority will do a means test to work out how much you must contribute towards the cost of your care. They will consider what is held in your savings and bank accounts and your property will be included in the means test at its present market value. Currently, if your capital is above £23,250, you are likely to have to pay your care fees in full. If your capital is under £23,250 you might get some help from the local council, but you may still need to contribute towards the fees.
Many clients we speak to wish to protect their biggest asset, their family home from being sold in order to fund care home fees later on in life and therefore qualify for care fee funding, however it is not always that simple. There are risks if you intentionally gift your assets away for the purpose of lowering the value of assets which will be included in a care home fees financial assessment. The local authority will likely view this as a deliberate deprivation of assets. If a local authority concludes that it was your intention to purposefully deprive yourself of your assets in order to get financial help with care fees, they can include these assets for assessment purposes and even in certain circumstances, reclaim the gifted asset as payment for any outstanding care fees.
What Are The Other Risks of Gifting My Home to My Children?
Other risks you might not have thought of include a breakdown in relationships. You may have a good relationship with your children at present day, however unfortunately no one knows the future and family relationships do break down. You are unable to put conditions on gifting. For example, you may agree with your children that you can live in the property until you die, however you have no legal right to stay in the property and could be evicted. Once you give your property away, it is irreversible and you cannot get it back – all decisions (including mortgaging, selling, or maintaining) are made by your children who are the legal owners and if the relationship breaks down, it may mean that your interests are not protected.
Furthermore, once the property is given to your children, it becomes their own asset, whether you are living in it or not. This means that the property may be caught up in their circumstances and therefore lost as a result of being sold to satisfy divorce or bankruptcy settlements, leaving you in a complete unprotected position. It does also mean that if your child predeceases you, the asset falls within their own estate meaning that it will pass either under your child’s Will or under the Rules of Intestacy if they died without a Will. This means that the property may pass to someone who you may not wish to inherit and who ultimately has legal control of the property. Again, although this is not always a problem, this may place you in an unprotected position as they would have the legal right to evict you from the property, leaving you homeless.
As with any decision, it is important to consider all the tax and practical implications before going ahead with any transaction. If after reading the above, you do wish to proceed or if you have any other questions or queries on gifting your property, please do contact us.
Contact us
☎️ Call our Wakefield office on 01924 290 029
☎️ Call our Garforth office on 0113 246 4423
☎️ Call our Sherburn in Elmet office on 01977 350 500
☎️ Call our Mapplewell office on 01226 339 009
☎️ Call our Ossett office on 01924 586 466
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.
Prince Died Four Years Ago and Left No Will.
Four years ago today the music legend Prince passed away. With a career earning him seven Grammy Awards, seven Brit Awards and a Golden Globe Award to name just a few you’d expect him to have an Estate worth a bob or two. But what happens if you die without a Will?
In fact it’s estimated his Estate was worth over $150 million and with posthumous releases of his work it’s likely to have grown in size. But guess what, despite such riches, Prince didn’t have a Will in place.
Why Should You Make A Will?
With no documented wishes, there ensured an onslaught of children, siblings, distant family members and ex-wives all trying to make claim to the Estate. What followed was reportedly a three year legal battle costing in excess of $45 million. That’s a lot of his Estate spent fighting, surely not something that Prince would have wanted to happen to nearly a quarter of his worth.
Making a Will often seems like just ‘one of those jobs’ and gets put on the back-burner to be dealt with when the more exciting things in life allow. And this is fine until it’s too late. Then what’s left behind is a family, potentially a feuding family, having to deal with an Estate whilst also grieving.
By taking the time to make a Will, you ensure that your wishes are honoured and your loved ones aren’t left to navigate a complex and costly legal battle. It’s a simple step that provides clarity, peace of mind, and, most importantly, avoids the stress and heartache of family disputes during an already difficult time. Don’t leave things to chance and make a Will today to protect both your legacy and the people you care about.
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How Long Does it Take To Make A Will?
All it takes is a couple of hours to document your wishes and make a Will. These couple of hours can save weeks, if not months, of anguish and upset and falling out not to mention the hefty price tag that comes with contesting a Will.
While it is possible to write a Will yourself, using a qualified solicitor ensures that your Will is legally sound, accurately reflects your wishes, and minimises the risk of disputes after your passing. A solicitor can provide expert advice on complex issues such as inheritance tax, trusts, or ensuring vulnerable beneficiaries are properly protected. They will also ensure your Will meets all legal requirements under the law of England and Wales, reducing the risk of it being challenged or deemed invalid. By seeking professional guidance, you can have peace of mind knowing that your Estate will be distributed exactly as you intend.
Having a Will in place ensures that your estate is distributed according to your wishes after your death. Without a valid Will, your estate will be divided according to the laws of intestacy, which may not reflect your preferences. This could lead to family disputes, unnecessary legal costs, and a prolonged probate process. A Will provides clarity and can prevent the emotional and financial strain on your loved ones during an already difficult time.
You can write your own Will, known as a ‘DIY Will’, but it’s important to ensure that it is legally valid and clearly outlines your wishes. If you choose to write your own, it must meet all the legal requirements, such as being signed and witnessed correctly. However, using a solicitor can provide peace of mind that the Will is valid and that you are not overlooking important aspects, especially if you have a complex estate or family situation.
If someone dies without a Will in England and Wales, their estate will be distributed according to the rules of intestacy. This means the government will decide who inherits your assets, which might not align with your wishes. In some cases, this could cause financial strain or family disputes, especially if you have dependents or stepchildren. It’s always best to make a Will to ensure that your assets go to the people you want and avoid unnecessary legal complications.
Already Have a Will? Why Is It Important to Update Your Will?
Making a Will is a crucial step in protecting your loved ones and ensuring your wishes are carried out, but it’s not a one-time task. Life changes like marriage, divorce, having children, acquiring new assets, or even changes in tax laws, can all impact the relevance and effectiveness of your Will. If your Will no longer reflects your current wishes or circumstances, it could lead to unintended consequences, including disputes among family members or assets being distributed in ways you no longer intend. Regularly reviewing and updating your Will ensures that it remains valid and aligned with your latest intentions.
How Do I Update My Existing Will?
Updating your Will is straightforward but must be done correctly to ensure its legal validity. In England and Wales, you can update your Will by:
- Creating a Codicil – A codicil is a legal document that makes minor amendments to an existing Will without needing to rewrite it entirely. However, it must be signed and witnessed in the same way as your original Will.
- Making a New Will – If your changes are significant, it’s often better to create a new Will that revokes the old one. This ensures clarity and avoids confusion over conflicting instructions.
To avoid mistakes or legal challenges, it’s always advisable to seek professional guidance from a solicitor when updating your Will. They can help ensure your amendments are properly recorded and legally binding, giving you complete peace of mind.
Contact us
Our advice is to make a Will. Click here to see our fees for making a will. With our will writing services in Yorkshire we will make sure that your wishes are heard when it comes to dealing with your estate when you die. If you wish to make a will or update an existing will then call us at any of our offices to discuss our needs and to make an appointment.
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.
