Care Home Fees, Inheritance Tax and Gifting Your Home
Looking a Gift House in the Mouth
In our spring edition of The Exchange we touched upon the difficulties younger generations face in being able to afford their own home. In this article we consider the other end of the scale in which an older generation face the concern of care home fees and even inheritance tax attaching to their property. Such concerns have prompted a trend amongst the older generation to consider transferring their homes out of their own names into that of their children.
Whilst on the surface this seems like the ideal solution to minimise your exposure to care homes fees and tax attaching to the home, the gift itself can result in uncertainty and potential risk to both the giver and the receiver.
Gifting your property may mean:-
1. No legal right to remain living in your home
It is essential to understand that in providing an outright gift of your home, your family will have full control of the property and may do with it as they wish. On the assumption that you remain living at the property, you will merely be an occupier and will have no legal right to object should your family decide to sell the property or pass their interest on to a spouse or otherwise.
2. If the recipient is married and later divorces, the property may need to be sold
Your home may also be at risk if the receiver of the gift is married and later divorces. The house may be considered as a matrimonial asset and divided as such during financial proceedings.
3. There is no time limit, after which the Council can recover care home costs direct from your family
There is no guarantee that gifting your home will result in no care home fees or inheritance tax being payable. Property that has been gifted may still be taken into account by local authorities and if the gift is seen as a deliberate deprivation of your assets, the council can recover care home costs directly from your family.
In addition, after making a gift of your home, if you were to die within seven years, the value of the property would be included within your estate and made subject to inheritance tax.
4. Increase in tax payments for the family
It is also worth considering the potential financial impact that the gift could have on your family. In addition to Capital Gains Tax implications, your family would potentially be subject to a much higher future rate of Stamp Duty Land Tax upon any future purchases of their own.
At Arnold Greenwood, we understand that even in light of associated risks, our clients may still wish to proceed with transfers of their property to their families in order to provide them with a more financially secure future. If you are considering making a gift of your property we would urge you to contact us for a discussion as to the risks involved. We can advise you on the ways in which such risks may be managed and reduced, enabling you to make an informed decision as to how you wish to proceed. The need for independent and in depth legal advice is essential to secure not only your family’s future, but also your own.
If you would like to arrange a free no obligation initial consultation please complete the form on this page, or give Jennifer Sparks or Lee Hughes a call on 01539 720049.
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