Is it wise to transfer my house to my children?
If you're thinking about transferring a house to children you should read the following article. Here at Inheritance Solutions UK we are often contacted by families who are thinking of transferring their house to their children. In order for us to advise you properly 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.
First it is important that you understand the risks of transferring property into a child’s name.
The first risk is loss of control: If you transfer your property into your child’s name then you will no longer be the legal owner of the property. Therefore, if you decide that you wish to sell your property you first have to have the agreement of the new owner in order to do so. Additionally, if they wish to sell the property, they will be able to do so without your permission.
The second risk is outside parties: You must also consider the possibility that your child may have an issue of their own, for example divorce. Your son or daughter’s soon to be ex spouse would have a legitimate claim against their estate which would also include your property. If your son or daughter had an issue with bankruptcy the property would also form part of the estate. This would potentially be claimed by any creditors seeking to realise money from their estate in order to repay monies owed to them.
The third risk is capital gains tax: This is more of an issue for your children than you but it is an issue nevertheless. Capital gains tax is charged when an asset that is classed as an investment goes up in value. 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.
The fourth issue is avoiding residential care fees: The most common reason that clients have of wanting to transfer property to their children is to avoid having to sell their home to pay for care fees. Transferring property to your children like this does NOT protect your home. Often this is classed as a gift with reservation. This is where you have made a gift but have reserved all the rights over it and so if care needs were to a rise this gift would be seen as an attempt to avoid paying for care. Therefore the property would be considered as part of your estate and used to fund your care fees.
If you were thinking of transferring your property to children some or all of these issues may apply to you. Therefore why not read our section on avoiding care home fees or call us on 0800 028 5119 to discuss your situation and see how we might be able to assist you.