Should I Give My Home to My Children?

Thomas Hazlewood, our specialist in Wills, Estate Planning and Lasting Powers of Attorney responds to a question he is often asked…

“Should I give my home to my children now, in my lifetime?”

It is a question that I get asked time and time again and my first response is always: “Why?”.

This time, my client explained that they are concerned about Inheritance Tax and read recently that giving the home to their children now was a possible way of mitigating that. They explained that they are aware of the 7 year rule when it comes to lifetime gifting but is in good health and thinks it unlikely that would be an issue for them.

Two points to consider

Whilst this might seem like a straightforward solution if you have a taxable estate, the reality is more complex. There are many things to be aware of if you are considering this yourself but for now, I wish to raise just two:

1. Inheritance Tax: One tax complication (and there are potentially others too), where you make a gift of a property but continue to live in the property, HMRC will view this as what is called a ‘Gift with a Reservation of Benefit’. A Gift with a Reservation of Benefit, (or GROB for short) is where you have given the asset in name, but you are still reserving use of it. If a gift is a GROB, that 7 year clock doesn’t start ticking. As a result, for Inheritance Tax purposes, the full value of the asset will still be treated as being within your estate when you die. Possible solutions to this could be paying full market rent to continue in the property, but my client agreed, whilst financially they were more than secure, they were not in a position to pay full market rent to (in their own words) “live in their own home”.

2. Practicalities: Even ignoring any potential tax issues, on a purely practical level, if you give you home to your children, it will be their asset. They will be the legal owners. It will be in their estate. Therefore, even if your relationship with them remains a positive one and you do not fall out with them at any time:

• If they divorce from their partner at any time, the property (or their share of it) may be considered part of their marital assets.
• If they face financial difficulties or bankruptcy, the property could be at risk.
• If they die, it will likely pass according to their Will.

By giving your home away, you therefore lose your control over it.

Take away

Above, I have highlighted just two of the many considerations. It does however highlight that seeking professional advice is crucial to ensure that your estate planning strategy aligns with your goals and protects your family’s future.

If you are looking to review estate and seek options that work for you and your family email or phone us today. 

Estate planning, including writing a Will is one of the most important steps you can take to secure your future and protect your family.