Can I give the house to my children now?

Updated: Jul 17, 2020

Who doesn’t want to avoid paying for their care fees or inheritance tax? Whilst there are legitimate ways to help lower your exposure, transferring your house to you children isn’t one of them. The reasons why you shouldn’t gift your home to your children are countless, below we've highlighted a few important things to consider.

1. Loss of Control

You will no longer own your property.

If you want to move, re-mortgage or make any adjustments to the house you will need the permission of your children. While the relationship you have with your children may be perfect at the moment, this could always change- especially where money is involved!

What if your Son/Daughter gets divorced or gets into money trouble? Your house may need to be sold to pay for their divorce settlement or their debts. You will then be left trying to purchase a new property with depleted funds.

For example, read the story of Neville Paull, he transferred his £650,000 property to his son. His son then asked his father and his severely disabled partner to leave, saying he 'requires the property for his own use'. The father and son ended up and in a costly court battle, which Mr Paull senior eventually won, allowing him to keep his home.

2. Inheritance tax

Most people have heard of the “7 year rule” and think that if they give their property away and then live for 7 years then the value of their property is not included in any inheritance tax calculation. However, most people are unaware of the “gift with reservation of benefit” rule.

This means that if you gift your property to your children but continue to live in it, the value of your home will still count towards your inheritance tax bill. The only way to get round this rule is to pay your children a market rate rent every month. You would probably end up paying more out in rent than you would save on your inheritance tax bill.

3. Capital Gains Tax

This is something that most families seem to overlook when they are thinking about gifting their home. Usually, the house that you live in is not subject to Capital Gains Tax because of the primary residence relief, which means that you can sell the house that you own and live in and not have to worry about Capital Gains Tax.

However, if your property is owned by your children, and they do not live in the property, then they may have some Capital Gains Tax to pay when the property is sold, either during your lifetime or after your death.