It is not uncommon to believe that if certain assets are moved or transferred as a “gift” over seven years before someone dies, they are exempt from Inheritance Tax. Whilst this is, generally speaking, true of monetary gifts, the same cannot be said for property. MG Legal, your Wills Solicitor in Longridge are highly experienced in the field of Wills and Probate and we have seen, first-hand, the problems that looking for that loophole can cause. 

If someone owns a home of substantial value, they may think that to transfer the house to their children when they are, say, in their mid-sixties would see them clear of any issues regarding Inheritance Tax when they die. However, this is not entirely true and it can indeed trigger other consequences that complicate their children’s finances. 

 

To truly ‘gift’ a property the entirety of the benefit of the property must pass to the children (or to whomever else you intend to bequeath the property). If you do so, or say you sell the property at a token price to them, you would be expected to pay something approximating market rent to them if you intend to continue living in the property. Should you not do so, you would be deemed to have retained the “Whole Benefit of the Property” as you would still be the main occupier, paying no rent or other financial contribution to the same. 

 

You would also likely cause your children to be deemed to have a Second Home, increasing their liability for Stamp Duty on any other purchases and also their liability for Capital Gains Tax on any increase in value of the Property. If your sale price to them was nil or say a token £1.00 and the property is then sold for its’ true market price, the CGT on such a transaction could be significant. 

Once transferred, the property would be legally belonging to, say, your son. If he was married at the time of transfer and then Divorced, the Property would be automatically drawn into the “Matrimonial Pot” and could well be split or the sale forced to liquidate assets to settle the Divorce. You could, ultimately, be left without a home and only a fraction of the monetary value, once the Divorce is finalised. Similar issues could arise if you ever had a falling out with your son or daughter and they decided you were no longer permitted to live there. 

 

Our Wills and Probate Solicitors are here to advise you- please contact us, online here… or on Preston 01772 783314, Garstang 01995 602129 or our Wills Solicitors in Lancaster on 01524 581306, before you fall foul of any ‘loopholes’. 

Whilst this is unlikely, it is not beyond the realms of possibility and depending on their circumstances and their Will, you could end up sharing the property or even being forced out by a distant relative, daughter-in-law or grandchildren. 

 

Finally, there is the prospect that if you subsequently required Residential Care, you may be deemed to have taken this action to avoid the value of the home being used to fund your care. This is known as Deliberate Deprivation of Assets and so, if this is the Local Authorities’ decision, you may be denied access to Social Care. 

It seems unfair, you worked to earn money, upon which you were taxed, you saved your money, upon which you were taxed, you bought the house, upon which you paid the tax of Stamp Duty and now, as you depart the world and when you simply wish to pass on the benefits of your hard work to those closest to you to make their lives a bit easier, there is yet another tax waiting in the wings. 

 

That said, to avoid complications and to avoid the various potential pitfalls above, MG Legal, your Wills Solicitor in Longridge, recommends that you play by the book and leave your children the legacy of your estate, without any legal battles to fight. 

 

We strongly recommend making a simple but comprehensive Will to ensure that, after the inevitable taxes, your estate goes to those whom you wish it to go to. Our Wills solicitors have an offer on at the time of writing: Wills are £75.00, plus VAT, and Lasting Powers Attorney are £200.00, Plus VAT*. 

 

Contact MG Legal by phone, email, web-contact form, here, or at any of our offices in Longridge, Lancaster and Garstang and we will provide you with an affordable and highly competitive quote for a comprehensive Will. During the Coronavirus lockdown, we have put in place special measures that allow us to continue to deliver an efficient and comprehensive service to our clients, whilst ensuring that both our client and our staff stay safe in these unprecedented circumstances. 

 

*Prices correct at time of posting.