There are a number of reasons that you might want to transfer ownership of your property to a child. It might be a method of reducing any future inheritance tax liability or you might want to help them get on the property ladder. There will be tax considerations regarding capital gains tax, inheritance tax and also stamp duty, with these rates being varied by successive governments and also the mechanism by which they apply. In this article, transfer of property from parent to child, we take a look at the mechanism involved.
Free Initial Telephone Discussion
For a free initial discussion on how we can help you with the legal aspects of transferring a property to a child, get in touch with us today. We will review your situation and keep you regularly updated, discussing progress in a clear and approachable manner. Early expert legal assistance ensures no mistakes are made and also avoids the stress of dealing with these issues on your own. Simply call us on 0345 901 0445 or complete our online enquiry form and a member of the team will get back to you.
Giving the property as a gift
The most common way to transfer property to your children is by giving it as a gift. By doing this, your inheritance tax liability will be reduced when you pass away. As it currently stands, inheritance tax starts at 40% and it applies to any property you own over £325,000. You and your partner can combine your assets so it starts at £650,000. If your house is valued at over £650,000, inheritance tax will be due and it is a good idea to consult a suitably qualified tax adviser in order to mitigate the amount that will be due.
As long as you live for another 7 years after you’ve gifted your property, your children won’t have to pay inheritance tax. If you don’t, it would still fall under your assets when you die and tax would have to be paid on it. If you die between 3 and 7 years after gifting your property, your children will still have to pay tax, but not the full 40%. This is known as ‘tapered relief’.
Once you have gifted your property to a child, it is important to remember that you will not be able to live there rent-free because if you do, inheritance tax will become due. Rent must be paid at a fair market rate.
Are there any other risks in transferring ownership to a child?
Everybody’s circumstances are different and there may be a number of reasons you want to transfer ownership to a child. Be clear from the beginning what you are agreeing to. For example, are you going to stay in the house and pay rent, are you going to move out completely upon completion, are you aware that if the child is married the house may be involved in divorce proceedings at some point in the future. As long as you try and keep emotions out of the whole process, things will progress much more easily. Just remember, Gifting or transferring property to a child can mean you are no longer the homeowner. This means you don’t have any rights to the property. Usually, this is not a problem, but in theory, you could be in a vulnerable position.
Can I gift the property to avoid paying care home fees?
It is important to be aware that transferring your property to a child may be viewed by the council as a method of concealing wealth and as such a way of avoiding paying care home fees. This is known as a “deliberate deprivation of assets” Consequently, transferring property to your children in this way may be seen as an attempt to conceal property wealth to avoid paying for care.
If this is deemed to be the case, the local authority can reverse the transfer of ownership. This means the home is switched back to the parents and will be included in the test for funding.
How we can help
We have a proven track-record of helping clients transfer property to their children or grandchildren. We will guide you through all the necessary legal due diligence in a comprehensive and timely manner. We firmly believe that with the right solicitors by your side, the entire process will seem more manageable and far less daunting.
How to Contact our Residential Property Solicitors
It is important for you to be well informed about the issues and obstacles you may face during the transaction. However, expert legal support is crucial in terms of saving you money and ensuring you achieve a positive outcome.
To speak to our Residential Property solicitors today, simply call us on 0345 901 0445, or allow a member of the team to get back to you by filling in our online enquiry form. We are well known across the country and can assist wherever you are based. We also have offices based in Cheshire and London.
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