Gifting proportions of proerty to chilren

simon2018 wrote: »

Hello

Question on behalf of family.

They want to give 50% share to their adult/child that lives at home.

They want to give 50% of share of a rental property to their adult child that lives away from home.

My family, the husband and wife are booth rtired, one has state pension other is 58 and retired early.


Reason to give shares of property is to leave kids something in case they end up in a care
home about both properties are worth close to 900k. (Yes they have worked hard, paid taxes, still paying taxes, nothing was given or left to them by their parents so its their own hard work and reason they cought the second property was to genrate income and ensure their children were helped fincially. Sadly, no one knows who will end up in a care home and I have an uncle that has suffered from severe demntia and been in a home for a good 8 years, his wife could not look after him or their children as he turned on them, he was nothing like that before the illness progress, and it costs them about 6k a month, average costs since is home about 5k as used to be a lot less 8 yrs ago.


So what is the best way forward.
What are the implications.
AS I understand no stamp duty would be payable.

Any other helpful hines/advice

Thank you

A very bizarre idea indeed. It will not be effective for any purpose in the UK aside from increasing the amount of CGT the government will get...

Giving away your home, or part of it, is in my view a serious mistake. There are the "what ifs". What if they want to downsize? What if the adult child goes bankrupt or divorces?

Giving away half a rented out house has fewer downsides apart from losing half the rental income. Perhaps the parents have sufficient assets for this not to matter, but if they do why the concern about care costs affecting the houses?

There are the moral considerations - how is giving away your assets to avoid care home costs any different from refusing to work so as to maximise benefits? Would children be happy to see the parents shunted off to somewhere as cheap as posssible so that they could enjoy the maximum inheritance when the parents have gone?

However there is the practical matter than most people dont end up in care homes, and most of the minority that do dont last long. So actually complex schemes to avoid care home charges may well not be necessary even if they were successful. Councils try hard to make to make benefiting from deprivation of assets difficult.

Retaining the equity in your home as insurance against care costs is in my view the easiest and most efficient way of ensuring your very old age is as comfortable as possible. It also gives you the opportunity to raise money for care at home which is far more likely to be needed and the amount available from the council is pretty limited in time and scope.

Lets break it down

simon2018 wrote: »

Hello

Question on behalf of family.

They want to give 50% share to their adult/child that lives at home.

This one can work, but 50% may be too much, will they continue to live at home, do thye have family of their own...?

if say there are 3 people the parents and the child, then gifting 1/3 would become a PET(not gift with reservation) and drop off the IHT in 7 years. Any mortgage as that would complicate and could end up with SDLT, none on just a gift. there should be limited(potentialy none) exposure to IHT or CGT.


They want to give 50% of share of a rental property to their adult child that lives away from home.

Various complications with this, there will be a CGT assessment on disposal, again any mortgage will complicate and potentially result in SDLT, depending on how the future income is shared there could be Gift with reservation implications.

My family, the husband and wife are booth rtired, one has state pension other is 58 and retired early.


Reason to give shares of property is to leave kids something in case they end up in a care home.

NOT a good idea to talk about care as a primary intention as that can be considered deliberate deprivation, far better to talk about the tax savings and other beneficial reasons for distributing and being clear there are enough assets left over to cover the care considerations.


about both properties are worth close to 900k. (Yes they have worked hard, paid taxes, still paying taxes, nothing was given or left to them by their parents so its their own hard work and reason they cought the second property was to genrate income and ensure their children were helped fincially. Sadly, no one knows who will end up in a care home and I have an uncle that has suffered from severe demntia and been in a home for a good 8 years, his wife could not look after him or their children as he turned on them, he was nothing like that before the illness progress, and it costs them about 6k a month, average costs since is home about 5k as used to be a lot less 8 yrs ago.


So what is the best way forward.
What are the implications.
AS I understand no stamp duty would be payable.

Any other helpful hines/advice

Thank you

PS - IF YOU DONT HAVE A PENNY TO YOUR NAME AND ARE ENVIOUS, DONT BOTHER RESPONDING

Their estate although OK for now is likely to become liable to IHT with some HPI given 2 houses, some planning is a good idea.

Gifting parts/all of own home is usually not a good idea, often a bad one, but as the recipient will be living there that mitigates the worst tax problems, and would take at least a 1/3rd of that value out of the estate and give the child some security.

The let property comes with other complication and if it has increased in value a lot any disposal has a CGT impact.

need more details to consider other options.

Browntoa wrote: »

Cash gifts are allowed under the 7 year rule , after 7 years there is no tax

The seven year rule wouldn't apply if the parents continued to live in the family home.