“I’m not paying Inheritance Tax or Care Home Fees as I put my home in my children’s names”
Wrong. Only in very specific circumstances might this be applicable.
So why can’t you do this, well, you could gift the home to them if you had other means to support yourself and didn’t need the money. However, if you remain in the home then it is very likely this transfer would be a gift with reservation of benefit and therefore subject to these pitfalls and classed as belonging to you when calculating Inheritance Tax. Should you make the transfer with the intention of solely avoiding care homes fees then it could be considered a deliberate deprivation of assets, and basically on the surface, it might seem like the perfect way to protect your children’s inheritance, but local authorities are increasingly wise to these type of schemes, with teams in place to ensure residents are not using them to get out of paying rising care costs.
I am often contacted by people who say they are putting in place a protective property Trust often for thousands of pounds and sometimes this is incorrect and they have received poor advice. If you are considering a lifetime Trust for your property or assets it is important for us to understand why you want to do this, and look at some of the key areas in which we may be able to assist you.
So, what do you need to consider when transferring your property to a child’s name? Well, firstly, you no longer own it. They could remove you from the property, hopefully unlikely as they are your children but you are no longer the owner. They could simply sell the property as owners. If you wish to move, you are not the owner, it’s up to your children if they let you.
So, let’s say you’ve made the transfer. Your son is the legal owner, so far, so good. But what if they get divorced? Your house is owned by him, your son’s soon to be ex-wife can make a claim against that property which would be legitimate. There is also the issue of their finances, what if they go bankrupt? Well, sadly you would lose the house, it forms part of their bankruptcy, any creditors could potentially seek to realise your home address in order to repay any debts to them.
Let’s not be too pessimistic, your son didn’t get married and is a successful businessman and owns his own home. Well, he might have to pay Capital Gains Tax (CGT) on your house. This is more his problem than yours but If your children are not living in your property when you transfer it into their names it will be subject to capital gains tax when they come to sell it. This means that if the property increases in value after being transferred over to your children, they may then be liable to pay tax on it.
As you can see, there are some pitfalls to this transfer and I can’t stress enough the need to seek appropriate professional advice.
If you were thinking of transferring your property to children some or all of these issues may apply to you. Therefore, why not get in contact for our free review.
Telephone- 01243 945054 / 07881104008
I look forward to your call.
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