Advice On How To Give Away Your Home Legally
Many people are concerned that if they had to go into Residential Care they would be forced to sell their home. Because our home is often our most valuable possession, naturally, we wish to make sure that our home is passed on to our children or grandchildren.
Accordingly, many people make a decision to transfer their home into the names of their children. It is important that you take independent legal advice as to the implications of doing this, so that the advantages can be raised against the disadvantages before you make an appropriate decision.
We want to give our home to our children - Are there any problems?
There are a number of pitfalls:
You may still be responsible for the building insurance and general maintenance. To prevent any future problems, it is necessary to discuss with your children and establish who is to pay for all major outgoings of the home.
Your children could ask you to pay rent. The only way around this would be to have a lease back in your favour, or a Declaration of Trust from your children.
If your children become divorced or bankrupt, their ex-spouse or Trustee in Bankruptcy could have a claim on your home.
If your children use the house for security for a mortgage, then you could find yourself in the hands of the Bank/Building Society should repossession occur.
Problems can arise if your children die before you do, and no provision has been made in their Will. You could be homeless. The gift may impact their Inheritance Tax situation. Inheritance Tax may be payable if a person dies and leaves an estate over £325,000 (tax year 2009-2010).
There are complicated tax implications if you transfer your home and still live in the property and your estate, including the value of the home, is worth over £325,000 (tax year 2009-2010).
The Transfer may affect your childrens Capital Gains Tax position. If you own your own home and live there, no Capital Gains Tax is payable when you transfer ownership on any gain made on the original purchase or acquisition price. Your children will acquire the property at its present market value. There may be Capital Gains Tax payable by your children when they eventually dispose of the property and they should obtain independent advice on the implications.
If the onus behind the gift is merely to avoid Residential Care fees, then Local Authorities do have powers to set aside gifts made within a certain period of going into Residential Care, and they can also use Insolvency powers as well. Different Local Authorities have different views as to how far back they can check.
If you are in receipt of means tested state benefit and you give your home away, the Benefits Agency are more powerful than Local Authorities.
It is therefore critical to take legal advice before giving away your property, and your children should be advised to seek independent advice too.
What about giving half of the property away?
Most people own their own property as joint tenants. This means that when one of them dies the property will pass to the survivor.
Alternatively, you can sever your joint tenancy, so that the property is owned as tenants in common. You can then either give your share away whilst you are alive, or put it into trust for the next generation, or share it in by your Will.
This would have an important advantage in that should the surviving spouse need to go into Residential Care, the Authorities could only take into account that persons one half share of the property, and not the whole.
How about buying a property with my children?
There might be issues in that your children could be removed from the property if you go into a Nursing Home or Residential Home.
You will need to consider carefully whether an inter-generational household is likely to work. It would be sensible to take legal advice as to putting the house into trust to avoid having your name on the title deeds.
Sheltered Housing
Sheltered Housing complexes for the over fifty five or sixty five present quite different problems. These purchases are often quite expensive and there are restrictions about who can buy the property, who can live there, and issues regarding pets and future sales.
You will have to look at the service charges and ground rents, how and when they can be increased.
You will need to check whether the property can be occupied by your child or children if they were to reside with you to look after you, or if you have a younger wife/husband, if she/he could continue living there after your death.
A qualifying buyer system often operates, that is, you can only sell to the management company, or to people of a particular age, group or type. This may severely restrict the purchase price. In all matters relating to property you should take full legal advice before making any formal decision.
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Jo Robinson is head of FB Wills Direct a company owned by Flint Bishop Solicitors. Find out about making an online Will quickly and cheaply at our web site www.fbwillsdirect.com or contact jo.robinson@flintbishop.co.uk