Thinking of Gifting your home?  A few things to consider

One of the main misconceptions that people have, is, that it’s in their best interest to make an outright gift of the family home, whether to mitigate care home fees or for other personal reasons. 

There are good reasons for being cautious about making an outright gift of the family home.  Consider the following situations that might affect your gift.

Financial Difficulties

The property will be owned outright by the recipient, so will be taken into account on bankruptcy. It may also be lost to creditors leaving the parents who gifted the property without a home.  Other financial pressures such as unemployment, illness or pressure from partners & immediate family may make it irresistible to sell the property.
Gifting the family home put  your residence at risk.

Divorce

All assets owned outright are taken into account as part of  a divorce settlement or the end of a civil partnership.
The property may be lost, if not immediately, then later, to the family of the former spouse or partner.This could make your position very difficult if your home was taken into account in a divorce settlement.

Means-tested benefits

The recipient might be in receipt of means-tested benefits. Those benefits could be reduced or stopped as a result of receipt of assets. If you are to continue to live in your property this should not happen as it should be ‘disregarded’ in their means-test calculations but if, for example, you entered into care it could be taken into account. The value of the property may therefore be swallowed up because the recipient might lose entitlements to benefits and needs to sell up and spend the proceeds.

The Power of Money

You need to consider the possibility that money has a power all of its own. When an asset is received the desire to sell it and spend it can prove overwhelming to some people; even   if there is no current intention on the part of the recipient to realize it. Motivating factors such as mortgages to pay, pressing debts, the desire for holidays and cars, can turn the heart of some towards realizing capital by whatever means necessary.. This is particularly important in the context of the transfer of the family home to the next generation and sadly it does happen

Bad Habits?

It is wise to bear in mind the possibility that, even if a child or other potential recipient is presently well disposed to you, a third party such as a spouse or other persons (perhaps not even on the scene yet), may not be. Drink and drugs have also led to the demise of many fortunes.

The beneficiary who dies prematurely

If a child dies, an asset given to them outright may pass by Will or the ‘Rules of Intestacy’ to a spouse who may remarry. Assets can also move out of the family for other reasons. Your home could end up in the hands of another family.

Generating Income

If you make an outright gift of your home you  can’t use it to generate an  income if you should need  it, rather than
a place to live.

False hopes about tax

Some people believe that all gifts, including a gift from which they retain a benefit, such as residence in the form of the family home, will have the effect of saving inheritance tax or some other tax. It will not usually have this effect. If the family home is transferred to a recipient who does not live there it will neither have the benefit of the ‘principal private residence exemption’ to capital gains tax on sale nor the benefit of ‘capital gains tax free uplift’ on your death.

Your home can be dealt with as you see fit. If, having carefully considered the situation, you decide to make an outright gift of the family home then it is your choice.