Peter Levy, Solicitor in Astle Paterson’s Wills & Probate department discusses the implications of choosing to give your home away in your lifetime.
Peter said “For a variety of reasons many people wish to transfer their home from their name into that of another – normally a close relative. However, it is important that you consider the potential problems that may arise should you gift your property.
Although it is the place where you live, if you no longer own it, you could be asked to pay rent some point in the future by the person you gave it to. Further, they may even sell the property and you could have no home.
If the person you have transferred your home to, were to become divorced or bankrupt, their ex-spouse or Trustee in Bankruptcy could have a claim on your home and you could end up homeless.
Once your home has been transferred out of your name, it will not form part of your estate when you die and will not be disposed of in your Will. This may save on probate court fees and administrative costs to your estate when you die. It may however be added to the value of your estate for Inheritance Tax purposes. The person to whom you transfer your home will need to make provision for your occupancy within their own Will.
Inheritance Tax may be payable on your death. Tax is payable on the amount over this figure at 40%. If you have made gifts of money or assets away in your lifetime over £3,000 and within 7 years of your death, the value of these gifts may be added to whatever other assets you own when you die, to determine the tax payable. There are complicated tax implications if you transfer your home and still live in the property when your assets, including the value of your home are worth over the nil rate band.
If you own your home and live there, no Capital Gains Tax is payable when you transfer the ownership, on any gain made on the original purchase or acquisition price. The person you transfer your home to will acquire it at the current market value. However, there may be tax payable by them when they eventually dispose of the property and they should obtain independent legal advice on the implications.
Finally, if you are in receipt of means tested state benefits, such as income support and you give away an asset such as your home, which appears to the Department of Works and Pensions (DWP), that you did so with the intention to reduce your assets, so as to qualify for certain benefits, they may assess you as if you still own the asset. Similar rules apply to financial help, which may be available from local authorities, for example if you need to move into a care home.
In short, should you be considering giving your property away to a relative or friend then you should seek immediate legal advice on the implications it may on you (or the person you are gifting the property to) now and in the future.”
Should you have any queries relating to the above then please contact Peter Levy of Astle Paterson’s Wills & Probate department on 01283 531366 or by way of email at plevy@astlepaterson.co.uk.
