Can I sell or gift my home to my children?
Ian Cooney • 21 January 2022
What are the implications if I sell or gift my home to my children?
One of the most common question I am asked as an Estate Planner; "Can we sell or gift our house to our children?"
The simple answer is YES, However there are many elements to consider before proceeding, it is not a financially viable or effective option, read on to see why and what you can do instead.
In this Blog I will explore the benefits, the disadvantages, the finish by suggesting an alternative course of action which avoids many of the issues I will discuss here.
So what are the benefits as so many people want to consider it?
- Your house value is removed from your estate which means it won't be used in the calculation for paying Inheritance Tax. (Subject to certain conditions)
- Your house does not make up part of your estate, should you need social or medical care, your home is not included in Social Services assessment of means. (Subject to certain conditions)
That is not many benefits for an asset most people have worked their whole life to accrue and is often the largest value of any asset held.
Lets look at the disadvantages to selling or gifting your home to your children, then I will suggest an alternative route to achieve your goals.
- Mentioned in the benefits, your home value is removed from your estate, however it will remain as an asset that can be included in your IHT calculation for 7 years. If you are elderly this may have significance or if something unexpected were to happen to you.
- Again in the benefits, your home does not make up part of your estate, as far as Social Services means test assessment, they will look at the circumstances around the sale/gifting of a property and have the power to claim it back in to your estate to enable it to be used in the assessment for how much you may be liable to pay for your care.
- If you sell/gift your house and continue to live in it, then you will need to pay your children full market value rent.
- The rent you pay your children if a second income will need to be declared and is subject to 40% tax.
- If your children already own a property, they are exposed to Capital Gains Tax.
- If your children don't own a property it will block them from taking advantage of any Government or other schemes such as Help to Buy, stamp duty relief, grants or anything designed for a first time buyer, including mortgage offers.
- Everyone says they get on well with their children, however, what happens if there was a falling out? You essentially are tenants in their property and they would have the power to evict you.
- What happens if your children have a break down in their relationship, their partner may be entitled or put a claim in to take part of the property or its value in a separation or divorce settlement.
- If your children default any payments, become insolvent or bankrupt, your property is liable to be used to settle any debt accrued.
- Should they need social care, your home will be included in their financial assessment.
- You ultimately have no control over your own home.
There is certainly a lot of implications if you are considering selling or gifting your house to your children. Looking at how much the disadvantages out weigh the benefits (of which have certain caveats) it doesn't appear to be a financially viable option not to mention all the other potential pit falls.
What can you do?
When estate planning we look at your whole estate and the options that suit your individual circumstances.
If you are mortgage free we would consider using a Trust to enable your property to be protected for your family to benefit from. This can be an effective way to minimise or mitigate many of the disadvantages listed above.
If you are not mortgage free, there are other options available to you which work in similar ways but have certain constraints.
When looking at Trusts you need to ensure you take advice from Trust specialists.
To book a free consultation to explore your option and your specific requirements please get in touch:
Request Call Back or Contact Us for a free appointment and advice for your specific situation. Or click here to book an appointment directly in my calendar.
We offer free advice for your Estate Planning needs, including Wills , Lasting Power of Attorney , Trusts , Pre-Paid Funeral Plans , and Probate services.
Or complete the form below to contact our specialists directly and get a FREE Estate Planning Checklist:
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What if your loved ones don't inherit? A Will may no longer be enough, we have some options to consider which could provide extensive protection for your estate for the future.
So we are coming out of Covid 19, but what should you be considering when it comes to your Estate Planning requirements?
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Unfortunately we don't know what's around the corner, Kate Garraway has spoken about the issues her and her family have been having since her husband went in to hospital with Covid-19.
I will go through some of the key information you should know about how to maximise your inheritance for your family, and explore how you can protect your estate to maximise your families inheritance. There will hopefully be time for some Q&A at the end. Access via Zoom (just click the link below to find out more on my Facebook page) https://fb.me/e/1HksDZ7PY
Which circumstances are similar to yours? ... What solutions should you consider?
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