For many parents, passing on property to their children during their lifetime can seem like a generous and practical way to help the next generation. However, gifting a home or other property isn’t always as straightforward as it might seem. Before taking this step, it’s important to understand the potential legal, tax, and personal implications.

Why People Consider Gifting Property

There are several reasons why parents choose to transfer property to their children:

• Inheritance tax planning – Gifting property can, in some cases, reduce the value of your estate for inheritance tax (IHT) purposes if you survive for seven years after making the gift.
• Helping children financially – It can provide children with a secure home or an early inheritance to support them as they build their own lives.
• Future planning – Some wish to simplify their affairs later in life or ensure the family home stays within the family.

Potential Risks and Considerations

While gifting property can offer benefits, it also comes with potential risks:

• Loss of control – Once you transfer ownership, the property legally belongs to your child. You can’t sell, mortgage, or make major decisions about it without their consent.
• Capital Gains Tax (CGT) – If the property isn’t your main home, you may face a CGT charge when you gift it.
• Inheritance Tax (IHT) – The ‘seven-year rule’ means that if you pass away within seven years of making the gift, it may still count towards your estate for IHT purposes.
• Deprivation of assets – If you later need residential care, local authorities may treat the gift as an attempt to avoid care fees and still include it in their financial assessment.
• Relationship breakdowns or financial difficulties – If your child divorces or faces debt issues, the property could be at risk.

Gifting but Continuing to Live There

If you plan to gift your home but continue living in it, you need to be aware of the ‘gift with reservation of benefit’ rules. This means that if you still benefit from the property (for example, by living there rent-free), it will likely still be counted as part of your estate for IHT purposes – unless you pay full market rent.

What Are the Alternatives?

Depending on your goals, there may be other options to consider, such as:

• Placing the property in a trust, offering more control over how and when it is passed on.
• Leaving the property to your children in your will, which can often be a simpler and more flexible approach.
• Discussing potential joint ownership arrangements to balance support with retained control.

Seek Expert Advice Before Making a Decision

Gifting property is a significant step, and every family’s circumstances are different. It’s essential to seek professional legal and financial advice before proceeding.

At Beers Solicitors, our experienced Private Client team can guide you through the implications of gifting property, explain the alternatives, and help you make the decision that’s right for you and your family.

Please do not hesitate to call the team on 01752 246000 (Plymouth) or 01548 857000 (Kingsbridge)