Gifting houses to children

Sireewiree

My elderly mother owns two houses outright. One is the family home, the other is a holiday let. 

She has announced she wants to gift the houses to my brother and me (my brother has the family home, I have the let). 

While I’m aware of the 7 year gift tapering for IHT purposes, I’m unsure of other aspects. 

1.  Can she gift the houses? 

2.  What are the possible tax implications for my brother and me (and are they different for each house?). 

3.  Are there any other possible big traps that may make this idea problematic?

We would legally ensure she has a right to live in the family home as long as she wishes. 

Thanks in advance. 

LightFlare

Does she have substantial cash reserves ?

If not, how would she pay for any residential care that might be required in the future ?

Sireewiree

LightFlare said:

Does she have substantial cash reserves ?

If not, how would she pay for any residential care that might be required in the future ?

Yes, she has some (£100k or so). I’m not sure about how the gifting sits should she use up her money (v healthy at present, but good point, we never know). 

Keep_pedalling

Under no circumstances should she gift her home, it would be foolish to give away the security it offers. You should also Google deliberate deprivation of assets. This would not work for IHT either as the 7 year rule does not apply to gifts with reservation of benefit (I am assuming she still plans to live there)

The holiday let is a different matter but comes with its own issues namely that of her CGT liability on the transfer of the property. This will be based on the market value and applies even where no money changes hands.

If this is a DIY IHT reduction exercise then you / she need to get a better understanding of the IHT rules, for instance taper relief only applies to gifts over the NRB and only then to the amount over that.

First thing to establish is would her estate actually have an IHT liability? What is the value of her home, and what is her marital status?

Flugelhorn

I think that the "deprivation of assets" thing only becomes a thing if you do as you become likely to need care 

Keep_pedalling

Flugelhorn said:

I think that the "deprivation of assets" thing only becomes a thing if you do as you become likely to need care 

True, but if the idea of this scheme is to avoid care costs it needs to be a consideration. 

Sea_Shell

Why not just sell the holiday let, and gift you both something from the cash?

She shouldn't gift her own home IMO.  

p00hsticks

Sireewiree said:

LightFlare said:

Does she have substantial cash reserves ?

If not, how would she pay for any residential care that might be required in the future ?

Yes, she has some (£100k or so). I’m not sure about how the gifting sits should she use up her money (v healthy at present, but good point, we never know). 

£100k doesn't stretch that far if it gets to the point of self-funding residential care.......

LightFlare

Sea_Shell said:

Why not just sell the holiday let, and gift you both something from the cash?

She shouldn't gift her own home IMO.  

I would agree with this

p00hsticks said:

Sireewiree said:

LightFlare said:

Does she have substantial cash reserves ?

If not, how would she pay for any residential care that might be required in the future ?

Yes, she has some (£100k or so). I’m not sure about how the gifting sits should she use up her money (v healthy at present, but good point, we never know). 

£100k doesn't stretch that far if it gets to the point of self-funding residential care.......

probably only about 2 years in a reasonably decent place

Sireewiree

Thanks to all. 

What your comments emphasise for me is the need for her to get professional advice. My brother and I don’t need the money/property for any reason at the moment, but my mum has a bee in her bonnet about offloading the properties as ‘gifts’ (which may not be appropriate).  

There will be an IHT liability on the estate with the properties, and from my point of view, she needs IHT planning advice and we take it from there. 

Your inputs are really appreciated. Thanks. 

Sea_Shell

Be VERY wary of any schemes or trusts that say they'll shelter assets from IHT or Care Fees.