will and probate sudbury

Gifting your property during your lifetime – should you do it?

When making their Wills and undertaking estate planning, many of our clients say they are thinking of making a lifetime gift of their home to their children. The most common reasons cited for this are (a) to make things easier after their death; (b) to offload responsibility for the upkeep of the property; (c) to avoid Inheritance Tax on death; and (d) to avoid paying care fees should they need to go into residential accommodation.

The first two of these motives are not unreasonable – although it is quite straightforward and relatively inexpensive to transfer a property after death; and children rarely live up to expectations when it comes to the upkeep of a property in which they themselves are not living.

However, if there is an Inheritance Tax liabilty, the value of your home will still be included in your estate unless you survive 7 years after it is gifted and you do not continue to live in the property. Giving away your home and continuing to live in it is known as making a “gift with reservation of benefit” – that is, you are still using the property as your own. In these circumstances, the value of your home will form part of your estate no matter how many years after making the gift you die.

So far as care fees are concerned, giving away your home (or any other substantial asset) is regarded as deliberately depriving yourself of assets. Should you later require any form of care, the value of the property would therefore be included when any assessment for fees was carried out, unless a spouse also occupies the property at the time. This could therefore leave you with a problem if you have gifted your home to your children and then neither you nor they have the cash funds to pay for any care you may need. You should also bear in mind that the 7 year expiry rule does not apply in relation to care fees and individual local authorities may check back even further to ensure that you have not given away assets which could be included in their assessments.

There are further possible situations to consider, possibly the most significant of these being death, divorce and bankruptcy. If your child or anyone else to whom you have gifted your home should die before you, their share of the property will form part of their estate and could be left to someone to whom you are unrelated or even do not know. Or the person to whom you have gifted your home could be divorced, so that their share of the property forms part of a divorce settlement. Finally, that person could be declared bankrupt, so that their share of the property falls into the hands of the Trustee in Bankruptcy. In each of these circumstances, there is the potential for you to lose your home entirely.

You may feel that you know your family very well and are therefore sure that they would not allow you to become homeless if you were to gift your property to them. You should bear in mind that any of these three scenarios could occur for reasons beyond their control.

All of the above applies particularly to any property in which you wish to continue to live. However, most also apply to any other property you may own. Even if you are not at risk of losing your home, you are still giving away a significant asset which will then be beyond your control.

Written by Catherine Palmer – Bates Wells & Braithwaite – 01787 880440

Catherine Palmer

Catherine is a specialist lawyer working in our Wills, Trusts and Probate Department.

Catherine began her legal career as a secretary with a large regional firm of solicitors before undertaking her legal training through distance learning.

She became a Graduate of the Chartered Institute of Legal Executives in 1999 before moving on to work, mostly as a locum, in firms all over East Anglia.

She joined Bates Wells & Braithwaite in 2016 and specialises in Wills, Powers of Attorney, Estate Administration, Court of Protection work and elderly client advice.

In her spare time, Catherine enjoys classical singing, gardening and walking with her dog.

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Please note that Bates Wells & Braithwaite are still operating during the Covid-19 Pandemic and will be throughout.

UPDATE: POST JULY 19th 2021

You can enter reception during our standard opening hours of 9:00am – 5:30pm Monday to Friday to enable you to produce ID or drop off or collect documents or to attend a pre-arranged meeting.

The office will be closed between the hours of 1pm and 2pm.

 

Please note that our Covid Policy requires all visitors to wear a face mask (unless you are exempt) and observe social distancing, even after July 19th 2021

This is to ensure that we continue to be able to offer an environment as safe as possible for all clients and staff

 

  • All meetings will remain to be by appointment only and where possible we ask that you arrange appointments by contacting us by telephone or email in order to assist social distancing measures.
  • We ask that you please do not arrive early or late to an appointment as we have to strictly control the numbers of people entering the building at any one time.
  • On entry, you will be required to wear a mask, obey social distancing rules, use the hand sanitiser provided and the wall mounted thermometer prior to approaching the reception desk.
  • To assist with social distancing, you may find you are asked to wait on the pavement outside the office, or that the front door is locked in order to control the number of people in reception at any one time.

We have a visual walk-through you can access by clicking here to outline all the rules and precautions we have had to put in place

 

If you are not yet ready to attend our offices we will still offer telephone or video appointments where possible.

 

Please call us on 01787 880440 to discuss existing or new instructions.

 

Thank you

The Directors of Bates Wells & Braithwaite

Last updated: 15/07/2021