Following on from my “Easter Gifts” blog, I received a number of queries about gifting the family home so I thought I would address this topic this month.
“I am moving into my parents’ house so that I can look after them so that they do not have to go into care. As a way of showing their appreciation, they would like to gift me their home.”
This is all very innocent and heartwarming but the risks need to be carefully considered, given that this is likely to be the most valuable asset your parents own.
Reasons against Gifting the Family Home
If you gift your property to your child and he/she becomes bankrupt or divorced, then your property may form part of those proceedings and you risk losing the family home.
We would all like to think that our children will survive us, but if they died unexpectedly, the property would form part of their estate and pass in accordance with their Will or intestacy rules. This could mean losing the family home to your child’s spouse or someone you did not intend to benefit from your estate, who may not feel it is their duty to take care of you and place you into care.
In both situations, you run the risk of losing a valuable asset and your “forever home”.
A possible solution could be to create a Family Trust, which allows the property to be placed into the names of Trustees who will be responsible for the property “Trust Fund”. The property is therefore protected from the risks mentioned above. Being named as one of the beneficiaries, you can remain in occupation of the property during your lifetime and other intended beneficiaries may benefit once you have died.
Please be aware that if the property is placed into trust, you will not be able to secure a loan against the property and the property insurance will need to be in the names of the Trustees.
Placing the property into trust is not an Inheritance Saving Scheme as you still retain the benefit of living there. Capital Gains Tax will not be an issue as the property will be your main residence.Find out more about our Trusts & Estates department