07 May 2025
While there can be benefits, it’s important to understand the full picture before making such a significant decision. There are several legal, tax, and financial considerations to take into account.
Inheritance Tax Implications
One of the most common reasons people gift their home is to reduce the value of their estate for Inheritance Tax (IHT) purposes. However, it’s not as simple as handing over the keys.
To successfully remove the property from your estate:
If you don’t pay rent, the gift is considered a “gift with reservation of benefit”, meaning for tax purposes, HMRC will still treat the home as part of your estate, defeating the goal of avoiding IHT.
Capital Gains Tax for the Recipient
If the people you gift your home to don’t live with you in the property, they may be liable for Capital Gains Tax (CGT) when they eventually sell it. This could significantly reduce the financial benefit of the gift for your loved ones.
Loss of Access to Equity
Once you’ve transferred ownership of your home, you no longer have access to its capital value. This means:
This can be a major drawback if your financial circumstances change later in life.
Care Fees and Local Authority Rules
Some people consider gifting their home to avoid using it to fund future care. However, local authorities are alert to this. If they believe the gift was made deliberately to avoid care costs, they can still treat you as if you own the home regardless of how long ago the gift was made.
This means your eligibility for financial support may be affected, and you may be expected to contribute towards your care as if the property were still yours.
Other Potential Risks
Gifting your home might simplify things by avoiding probate, but it can also expose your property to risks beyond your control:
What About Trusts?
Transferring your home into a trust may offer some protection and allow you to retain a degree of control. However, trusts come with their own complexities, and local authorities may still treat the property as part of your assets for care fee assessments.
Gifting your home is a big decision with lasting consequences. While it may seem like a way to help your family and plan ahead, it’s essential to get expert legal and financial advice to avoid unintended pitfalls.
If you're considering this step, our team can guide you through the options, helping you make an informed choice that suits your personal and family circumstances. Contact us on 01202 527008 or via online: Contact Us AB Solicitors For Your Legal Needs
