Can my father give his house to me?

chrislee765

Hi there,
I hope I'm not avoiding an obvious sticky thread but I don't know anything about what I'm asking so wouldn't know what to look for.

My father, I hope and guess isn't within 7 years of death, but something I am trying to find out about is whether I could buy his house from him for £1, or could he give me the property and I let him live in it rent free?

I hope someone could shed some light,
Thanks

jem16

chrislee765 wrote: »

My father, I hope and guess isn't within 7 years of death, but something I am trying to find out about is whether I could buy his house from him for £1, or could he give me the property and I let him live in it rent free?

If you allow your father to live in the house rent-free it is regarded as a gift with reservation. Therefore it will still count for Inheritance Tax purposes or for care home fees purposes.

dunstonh

answer to that is yes he can do it but it would create more tax, not less. You could end up with double taxation in the form of IHT and CGT.

As he lives in it rent free he is getting benefit from the gift. So, the 7 years never start counting down as its a gift with reservation. So, it would remain in his estate. When you sell it you would suffer capital gains tax as you have made a gain on the property value.

So, the proposals are pretty much the worst way of doing things.

localhero

Why would he want to do that, as potentially there are many pitfalls? First of all, his home is at risk if you got divorced or encountered financial problems, (or indeed you just wanted to turf him out.)

Secondly if he required long term care, the authorities would probably claim that he deliberately deprived himself of assets and would look to you to pay for his care.

Then there is the IHT problem mentioned by the above posters. If you own a property already then you can add CGT on any gain on your new second property.

If he wants to give you the property, then it's probably best that he makes a Will.

Paul_Herring

Also bear in mind that the '7 years' you're thinking of applies only to IHT, if he ever has to go into care, then they can go further back than 7 years for 'deprivation of assests' investigations.

whitfreak

You can get around the IHT thing if he pays you a market rate to remain in the property. But to avoid the benefit issues I'd imagine you'd have to pay him a market rate for the house.

There might be a way of making you a part owner (i.e. big house, traditionally the family home so shouldnt !!!! off the benefit guys too much) (joint tenants?). But that is just a guess.

Day_Trader

Paul_Herring wrote: »

Also bear in mind that the '7 years' you're thinking of applies only to IHT, if he ever has to go into care, then they can go further back than 7 years for 'deprivation of assests' investigations.

For IHT they can go back 14 years depending on when gifting was done and how.

CLAPTON

Day_Trader wrote: »

For IHT they can go back 14 years depending on when gifting was done and how.

could you explain what you mean?

Day_Trader

CLAPTON wrote: »

could you explain what you mean?

Chargeable Lifetime Transfers - gifting above the nil rate band - usually into trusts is based on the nil rate band at the time. If further gifts (whether CLTs or Potentially exempt transfers) are made within seven years of the initial CLT then everything will have to be worked back to the nil rate band that applied at that time.So if an initial CLT is done in 2000 and a further gift done in 2007 and the donor dies in 2014 then due consideration will be given to the initial CLT despite it apparantly being exempt under 7 years. A lot of people aren't aware of this fact when doing estate planning.

Hope you grasped that!!

oldandgrumpy

Please can someone explain. Under deprivation of assets, I assume that a person who has gifted his house to a family member, will have a charge made aginst the property for his long term care...after he is deceased. If the family member has held absolute title to the property for, say 13 years, will the charge be made against the property? If so, will the property have to be sold to remove the charge, or does the charge wait until the property is finally sold? Can the family member be forced to sell the property to pay the charge, even though it is their sole home?

Paul_Herring

I assume that a person who has gifted his house to a family member, will have a charge made aginst the property for his long term care

Possible.

If the family member has held absolute title to the property for, say 13 years, will the charge be made against the property?

While possible, it's unlikely (presuming the holding person isn't the one going into care.)

If so, will the property have to be sold to remove the charge, or does the charge wait until the property is finally sold?

Normally the latter. (Presuming the debt isn't actually settled otherwise before then.)

Can the family member be forced to sell the property to pay the charge, even though it is their sole home?

Not usually - creditors normally have to wait until the property is sold 'naturally.' http://www.insolvencyhelpline.co.uk/debt_factsheets/charging_orders_in_the_county_court.php#10