We regularly speak with clients who are considering gifting their home to children or loved ones — often with the aim of simplifying inheritance, assisting the next generation, or reducing future care fees. While this may seem like a generous and practical decision, transferring ownership of your property can lead to significant and often unintended legal, financial, and emotional consequences.
If you are thinking about making a gift of your home, it is important to understand the risks involved and to seek professional advice before taking any action.
- Inheritance Tax (IHT) Traps
One of the most common motivations for gifting a property is to reduce inheritance tax liability. However, if you continue to live in the property after gifting it — without paying a full market rent — HMRC will view the gift as a “gift with reservation of benefit.” This means the property will still be counted as part of your estate for IHT purposes, effectively nullifying the intended tax savings.
Gifting your home and continuing to live there is only effective for IHT planning if strict conditions are met. Our Private Client team can help you assess whether this option is appropriate and compliant.
- Capital Gains Tax (CGT) Implications
Gifting your main residence may not trigger an immediate CGT charge, but it can cause tax issues for the recipient down the line. If your children (or other recipients) do not live in the property as their main residence, they may face a significant CGT bill when the property is eventually sold.
Our advisers can help you consider alternatives that might minimise future tax exposure for your loved ones.
- Loss of Control and Potential Vulnerability
When you gift your home, you give up legal ownership. This means you are no longer in control of what happens to the property. The new owner could choose to sell it, raise a mortgage against it, or become subject to financial or personal difficulties (such as divorce or bankruptcy), all of which could put your home at risk.
Even if you have a strong relationship with the recipient now, personal and financial circumstances can change unexpectedly.
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- Care Home Fee Assessments and ‘Deliberate Deprivation’
It’s a common misconception that gifting your home will protect it from being included in means assessments for future care fees. However, local authorities have the power to challenge such gifts if they believe they were made to avoid paying for care — a principle known as “deliberate deprivation of assets.”
In such cases, the gift may be ignored, and you could still be assessed as though you own the property.
- Legal Complexities and Family Disputes
Transferring ownership of your home is not a simple matter. It involves formal legal documentation, registration at HM Land Registry, and possibly the involvement of lenders if there is a mortgage. Moreover, gifting property to one child and not others — or sharing it between multiple parties — can lead to disputes, misunderstandings, or claims in the future.
Lamb Brooks can help you put the right structures in place — such as declarations of trust or carefully worded wills — to protect family harmony and avoid conflict.
At Lamb Brooks, we believe in clear, practical advice tailored to your personal circumstances. Our Private Client, provide holistic support when it comes to gifting property, estate planning, and protecting your assets.
Before you consider transferring your home, talk to us about the best way to secure your wishes while minimising risk. We’re here to guide you through the process, offering peace of mind for you and your family.
Call on 01256 844888 or email us at enquiries@lambbrooks.com