signing your house over to your children the advantages ?

[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

[Jan]

I suppose that Inheritance Tax might come into it, providing they are wealthy. Also, I think there is something to do with nursing home fees in later life. The downside for the new owners might be that they may have to pay tax when they sell as it would be classed as a second home.

Since I retired I have not kept up with this side of things.

[skalexander]

My parents have similar plans. The house will belong to my brother and I but they will have an irrevocable tenancy with a peppercorn tent (like £1 a year). We don’t have inheritance tax here. My parents’ reasons relate to nursing home fees - they have a fair bit of cash so they will pay their way to a point if it comes to it, but they don’t the state having the house as well. As things stand, provided they sign the house over 10 years before they look to the state to fund any care, then it can’t be taken into account. Not sure if it’s the same period in the Uk.

[PerksP]

One of the other parts of this that I was warned about is to make sure that any partner of the children cannot have a claim on the house as part of any future divorce proceedings.

[Smilesonfaces]

My first thoughts would be what if the relationship with the child deteriorated for some reason, the parent outlived the child or if the child had a spouse would the property be included in their divorce settlement.
If the parents needed to go in to a care Home the council could pursue for deliberate deprivation of assets.

[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.

[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.

[Colette-S]

It has to be done carefully, the inland revenue are hot on investigating such transactions so they should ensure they get decent advice from a tax planning expert. Also, whilst I’d hope it wouldn’t apply to your friends in their early 50’s, they would need to survive 7 years post “gift” to avoid the inheritance tax rules. It sounds straightforward but there are complications and pitfalls so they should take thorough advice before going ahead

[munmun]

Please also consider Capital Gains Tax if this is a home you own and don’t live in you will be subject to CGT for the increase in value from the day it is signed over to you to the date you sell.

Be also aware if you are married this becomes part of your marital assets so if in the unfortunate situation that you split from your spouse the house your parents owned will be split in the divorce settlement.

Also be aware that you will become a landlord and will be subject to all the laws and requirements of all LLs. From annual gas safety checks to declaring your rent to HMRC, you cannot opt out if this.

Take good advice regarding deprivation of assets if the HMRC and authorities believe you have done this to stop being liable for care fees they will make a legal case against you and declare you have deliberately deprived yourself of assets and they will be returned to the giver and fees will be paid.

Believe me the government is well aware of this and has closed all the loop holes that make it beneficial.

[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.