signing your house over to your children the advantages ?

[skb 123]

The property would presumably also be at risk if any of the children get into financial difficulties or are declared bankrupt.

Not quite the same scenario but many years ago, my uncle bought a huge house with a granny flat which he invited my granny to live in. The family enlightened her of the risks and she stayed put. Fast forward and his business went bankrupt. As he had put house in wife's name, she walked away with the house and left him with nothing. And granny would have been homeless regardless of any agreement.

[grottyrotty]

Originally Posted by Jan

"If the parents needed to go in to a care Home the council could pursue for deliberate deprivation of assets."

There used to be a time limit on that - seven years, I think.

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Originally Posted by paw

15 years ago we changed from joint owners to tenants in common. Then we set our wills up so our children got a fraction each if one of us died, but this was held in trust and we can’t be forced out if relationships go wrong until both of us died. We felt this guaranteed some of our children’s inheritance if one of us died early and the other remarried. At the time we did this there were a number of cases of parents being evicted by their own children after signing over their homes.

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So, you need to be clear exactly what they have done. Have they paid off the mortgage and put the house in the name of their children with the Land Registry? Or have they set up a Trust? Very different kettles of fish.

We have set up a trust, whereby the house remains ours until we die. Then, and only then, the house belongs to the children. They cannot force us out of the house. We can even sell the house but there are conditions regarding the money from the sale. To do this, we changed ownship of the house from joint tennants to tennants in common ie we now both own a half of the house and can determine in our will who inherits each respective half.

Why have we done this? OK - this sounds really morbid and very cynical, but most of my family die at a young age (before the age of 60). Much as I love and trust my DH, I've seen how vulnerable older men can be if their spouse has died and a younger woman comes into their life.

I want the assurance that if I do die young, at least half the value of the house that I've worked hard for will not go to another woman or her children.

My mum was only 52 when she died. Sadly my dad lived longer without her, than he did with her (he died aged 80), and I saw first hand how a woman nearly wormed her way into my dad's life and almost convinced him that she should have her name put on property title of the house, so it would all be hers when my dad died. He had capacity, but seemed to be getting sucked into this woman's machinations. She'd even convinced him that they should elope and get married without me and my siblings being told beforehand

My dad's unexpected ill health had the woman running away from the relationship before any of her plans came to fruition.

Given that we were in our early 50's when we did set up the trust, and were in good health, it would very difficult for agencies to prove that we'd done this as a deliberate deprivation of assets. To me, not having to put the total value of the property towards a nursing home if one of us needs it is a secondary consideration.

My advice - if you are thinking of either of these options, consider carefully why you are doing it, and then seek legal advice to make sure you have all your t's crossed and i's dotted and ensure you do not leave yourself in a vulnerable position, and also don't leave a massive tax bill for your children.

Deb

Edited to say - if I do outlive my DH, I suppose I could be vulnerable to a 30 year old Brad Pitt lookalike coming into my life

[tspill]

Originally Posted by mandevillepete

They should take legal advice on this. There are stamp duty implications as the transfer may incur higher rate stamp duty if the children already own property. It should also be borne in mind that the house will now form part of their children’s estate should the worse happen to the children. It will then be subject to their inheritance tax. Also if the children are married and their marriage ends for any reason it could become the subject of a divorce settlement. It will be very difficult to argue that they just owned the house to avoid tax or fees. I am sure there are other implications too. Lots to think over.

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There are also income tax implications - as in essence they will be living "free" and the lack of paying rent is seen as a benefit and hence the rent they would normally pay is considered income and hence tax is due.

What if they need care in later life - how would this be paid for?

[Floridasun]

You need to take legal advice on this. I can tell you that the rules regarding nursing care have changed and if the house was signed over to children you have to prove that they have been receiving rent at the going rate from the parent if you want to avoid them taking the value of the nursing care after death.

[Charl_bb]

My dad looked into this and decided against it as like others have said I would effectively become his landlord, there would be tax implications and at the end of the day the powers that be can just decide that it was signed over to avoid care home costs and make you pay for them anyways.

[Guest]

The best way to achieve this is to sell the property. Give the money away to the kids and get them to buy a smaller house that they allow you to live in.

Of course if you place any stipulation (like you can never kick us out) it will still fail the deprivation of assets test.

A better solution is to sell up, buy yourself a new smaller house and give the residual away - so long as you last 7 years the residual is no longer yours in any way, and kids may still get the new house when you shuffle onwards anyway

[Brennanhough]

We are going through this at the minute, as my grandparents have been told that they have to go into a car home at a cost of £500 each per week and they have to fund it them sleeves.

There house is in a trust- advisors words were a trust isn’t worth the paper it’s written on. The government can still get there hands on the house. Really makes me sick, one has Alzheimer’s other has Parkinson’s, and have paid taxes all there lives. But that’s another discussion...

We were also advised that if you are ill, and you sign your house over, they will look at that as you trying to avoid paying any tax so they’ve got you that way too. Grandma put house in trust in 2000 and was diagnosed with Parkinson’s in 1997.

They said the only way to get round it was to sign the house over and you actually live there for the 7 year period and this could be done even with an illness. As long as you live there with the parents.

Really does wind me up the whole thing!

[Pussycat Doll]

My aunt, who is a lawyer, said years ago when my mum died, that dad should sign the house to me and be Tenants in Common. As long as it was done 7 years before the death of my dad then the state couldn't make any claim on it if he needed to go into a home. He wouldn't do it, I think he thought I'd throw him out on the street. When he did go into a home it cost us £8000 for 11 weeks, he'd be rolling in his grave if he knew how much it was costing. He died just as I was in talks with social services about selling the house to fund his care, he didn't know that either!

[Guest]

Originally Posted by juless77

Can anyone explain the advantages of signing your house over to your children a friend of mine is doing this they are in there early 50s They are still going to live there but its going to be in there childrens name and the mortgage paid off

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This is a very complex matter and I would not recommend you rely upon well meaning advice on a forum. You also need to look for the disadvantages not just advantages. I would talk to both a lawyer and an accountant.

Any inheritance tax advantages could be outweighed by capital gains tax implications for example.

And if they write this up such that they retain the absolute right to live in the house forever then it is a gift with reservation of benefit and the house would be part of the estate and subject to
IHT anyway. I think reserving the benefit could also negate any thinking around avoiding possible home costs too.

So they would have to hand the house over without any such arrangement which is risky if there is a fall out or the adult children get divorced or die or just decide they need the cash instead. And this would also mean paying market rate rent, which would then be taxable on the children.

I personally think the disadvantages and risk is bigger than the advantage. But then I do say this as someone with no children so I don’t care too much how much IHT my estate pays after I am departed.

[Guest]

My aunt is currently living out her final days in a hospice at the age of 59.

We live in London, herself central London so as a result her property is over £1million (it sounds amazing, in reality it's a 4 bed detached- London prices Hey!)

She is single so her inheritance tax threshold is low. The result is her 2 boys that live with her in the house will have to sell the house to pay the tax bill, pay the reamining mortgage and medical costs, and walk away with barely enough to cover a deposit on a flat.

She was too stubborn to sign anything over sooner, and didn't realise how quickly things can change. We've been advised we can't even draw large sums of money out as it will all be looked at as tax avoidance.

In hindsight, I think she wished she had done something similar to the OP years ago, or at the very least distributed her wealth rather than leave it sitting there . For different reasons granted.