If you are concerned about inheritance tax liability or know you may face the possibility of care home fees it may be tempting to consider gifting your home to your adult children, particularly if it was also their childhood home. However, there are pitfalls to consider:-
- If you gift your house to your children as a gift with reservation because you continue to live there, then the house will be treated as having never left your estate for inheritance tax purposes, so you may not escape the liability you were trying to avoid;Your local authority may still take account of the house value when assessing your contribution to long term care needs
- If your adult children need to raise funds, e.g. for business, they may use the house for security for a loan. If they subsequently default on the loan, you may lose the house;
- If one of your adult children divorces, the house will be seen as a marital asset and may have to be sold;
- If your adult children subsequently sell your house after you gifted to them, a capital gains tax liability may arise;
- If your adult children predecease you, ownership of the house will pass to their beneficiaries, depending on whether there’s a Will and how it’s drawn up, and they may not be willing to allow you to continue living there.
If you are concerned about inheritance tax liabilities or how best to leave your property to your children, please contact Alistair Dobson on 01858 445480 now or complete one of the on-line forms. You can make an appointment at any of our branches in Market Harborough, Wigston or on Uppingham Road in Leicester. We can also arrange a home or hospital visit if you are unable to attend any of our offices due to your ill health.
