Giving Your House Away
Provided no one else has any 'legal interest' in your house such as a co-owner or mortgagee, in general, there should be no legal bar to your giving your house away
If you give your house away and continue to live in it you will merely be a 'Licensee'. That means that you are living there with the consent of the owner but that consent may be withdrawn at any time and you would have to leave.
If you have given your house to a close relative, such as your child, you may be confident that they would not withdraw their consent. However, if the child were to die, the house (or their share of it, if there are more than one) will form part of their estate and could pass to some one else, such as their spouse. That person may not be as sympathetic to your situation as your child. Further if the child were to get into financial difficulties, the house may have to be sold to satisfy debts. Also, if you and the child were to 'fall out' your position in the house could become very difficult.
Many of the problems referred to above may be solved by the use of a trust. Instead of an outright gift, the house is placed in a trust which provides that you have a right to live in the house rent free for so long as you wish, but when you stop living there the house would pass to your child or who ever you wish. The trust can also deal with matters such as who will be responsible for repairs and maintenance and who will pay for insurance and any other outgoings. It would also be possible to provide that the present house could be sold and the proceeds used to buy another house or flat on the same terms. You can decide who will be the trustees (the persons who ensure that the terms of the trust are carried out) and you could be a trustee if you wish.
DWP/Local Authority Assessment
If your intention in giving your house away is to avoid having to use it to pay for care home/ nursing home fees you should be aware that there is no guarantee that you will succeed. The financial assessing regulations provide that if a person gives anything away for the purpose of avoiding that thing being assessed as part of their assets ('Deliberate Deprivation of Capital') they can be treated as if they still own the asset for the purpose of the assessment.
There is no time limit on when the provisions can apply so it may make no difference whether the gift was 5 years ago or 20 years ago.
If the gift is made within 6 months of your applying for financial help the house may be required to be transferred back to you. If the gift was made more than 6 months prior to your applying for financial help other means, such as insolvency provisions, may be used to have the house transferred back to you.
The DWP or Local Authority have no power to force you to sell your house, however they can register a mortgage which will cover whatever they pay on your behalf which you should have paid yourself. When the house is eventually sold the mortgage must be repaid.
[for further information on this please see Age UK Factsheets 38 & 40]
If you give your house away and do not declare your former ownership etc when applying for financial help you may be guilty of criminal fraud.
Capital Tax Considerations
Inheritance Tax ("IHT")
If you give your house away and continue to live in it or retain any benefit from it the value of the house may be included with the rest of your estate to calculate any IHT payable.
If you give your house away and move out and have no further benefit from it the value will not be included as part of your estate after seven years have elapsed. If you die within seven years of the gift the value of the house will be included.
Capital Gains Tax ("CGT")
Generally CGT is payable on the 'profit' made on the disposal of an asset. Where an asset is given away CGT still applies but the market value is used instead of the sale price.
It is unlikely that you will have to pay any CGT if you give your house away because there is a general exemption which applies on the disposal of a person's 'principal residence'.
If you have given your house away, when the house is eventually sold CGT may be payable, unless the person you have given it to lives in it. So a sale by your child or children after an outright gift to them or if the house is held in a trust may result in a CGT charge.
If a person still owns their house at the date of their death, and the house is then sold, in simple terms, the 'profit' is worked out by deducting the value of the house as at the date of their death from the sale price. If the sale is reasonably soon after their death the sale price is unlikely to be much greater than the value at the date of death and so little or no CGT is likely to be due.
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