Many of my clients approach me with queries about giving away their home with a view to saving inheritance tax or to protect their home from being sold to pay for long term care. My initial answer to them is that they can, but there are some very important factors to take into consideration before they make the decision to go ahead.
In many cases, the family home is the key asset. My clients make the decision to give away their most important asset for a variety of reasons. I see it as my job to point out all of the potential consequences of giving away their home (many of which my clients have not thought about previously), so that they have all of the information and advice they need to make an informed decision.
Initially, there are the tax consequences to take into account. The tax element can be broken down into the three main taxes relevant here – inheritance tax, capital gains tax and stamp duty. Everyone’s circumstances are different, and it is important to obtain competent advice in this area before agreeing to proceed.
Assuming there are little or no tax consequences of the transaction, there are other practical matters that may impact on the decision to proceed, such as divorce, bankruptcy and death. What will be the legal consequences of living in a home that is no longer owned by you? For example, if a client gives their home to their child/children, what happens if their child divorces, or dies before them? How can they protect themselves should such a situation arise?
In terms of long term care issues, it is essential to be aware of the powers of the Local Authority when assessing the care home charge. However, it is equally important to understand what will happen if long term care is eventually required and the family home has already been given away – what are the choices if funds are not available to pay for care?
There are alternatives to outright gifts of the home and these are well worth exploring.
Ultimately, it will be a choice for the client as to which way they would like to proceed on the basis of what is right for them. There is a lot to take into consideration and to think about.
Lauren Gillespie LLB (HONS)
Partner at Macmillans Solicitors LLP
Lauren is a full accredited member of SFE and a member of Cornwall Law Society.
She specialises in all areas of Private Client work, including Tax Planning, Trusts, Wills, Probate, Lasting Powers of Attorney and Court of Protection work.
Macmillans Solicitors LLP was established in 1806 in Wadebridge, North Cornwall and the firm prides itself on offering a quality service tailored to the needs of their clients.