Lasting Powers of Attorney

Giving away your home probably has more risks and implications than you think.

Here are some important points to consider:
      • It will not work if the main reason or if one of the reasons you are giving your property away is to avoid home care fees. You must have a very good reason for giving your property away during your lifetime to convince the Local Authority that you did not do it to avoid home care fees. If you go into a care home relatively soon after you give away your home or if you are already in ill health, it is still likely that the value of the house will be taken into account when the Local Authority make their assessment even if you didn’t give it away to avoid home care fees.
      • You must understand that a gift is a once and for all transfer. Once the gift is made, it becomes an asset of the recipient who can generally do with it as they wish. If the recipient dies, it will pass to someone else who may also then do with it as they wish. However, it would be possible for us to carefully draft a document giving you the right to continue living in the property for the rest of your lives rent free subject to various conditions. Your right to continue living in the property can usually be registered against the deeds. However, if the relationship between you and the recipient (or their beneficiary on their death) becomes hostile, you can find that living in a house belonging to someone else is very difficult.
      • If you give away your home will you still be able to top up the care home fees which the Local Authority will provide? You might end up in a basic home which is not to your liking.
      • It is not nice to think that this may be the case but if you give your home or assets to your children during your lifetime they might see less reason to try and keep you out of a care home because they have already received their inheritance! They may wish to move you more quickly into residential care so that they can sell the house.
      • If you give away your home and continue living in it, the value of the property will still be taken into account for Inheritance Tax purposes. However, if your total individual estate, including your house, does not exceed £325,000 (£450,000 if you are leaving your house to “direct descendants” when you die), your estate will not be liable to Inheritance Tax in any event.
      • There can be problems if either you or the recipient become bankrupt in the future
      • It is possible that your home becomes the subject of a subsequent matrimonial dispute between the recipient and their spouse
      • If you give away the home in which you live, there will be no Capital Gains Tax liability for you to pay when making the gift. However, when the recipient sells the house, they will have a potential Capital Gains Tax liability on the increase in value from when they acquired it. It is important that you consider taking detailed specialist tax advice in this respect and that a professional valuation is obtained from a qualified valuer at the time that the gift is made.
      • If you give away your house you will be unable to raise monies secured against it in the future for example, by way of mortgage or an equity release loan. You will also be unable to sell it to release capital.
      • You may live for a long time after you give away your home. You must consider whether you have sufficient alternative assets to enjoy the rest of your life with a comfortable standard of living.
      • The recipient may lose entitlements to certain benefits and/or services if they own the house in which you live.

Some of these issue (but not all) could be avoided by putting the property into a trust. However, trusts can be expensive and burdensome to set up and administer. Specialist advice should be taken before going down this route.

You must think very carefully before deciding to give away your home during your lifetime.

Consider other alternatives for what you are trying to achieve. For example, if you wish to ensure that a certain person will eventually receive your property, you could achieve this by making a will. If you are worried about responsibilities of home ownership in the future, a Lasting Power of Attorney may be more suitable.

If you own a property jointly with someone else, consider making a will gifting your share of the property into a life interest trust when you die and making provision for the survivor to carry on living there rent free for the rest of their life. Only the survivor’s share of the property could be taken into account for home care fees should the survivor then go into a care home. The other share would belong to the trust.

If you decided to proceed with the transfer, we would only act on your behalf. We would not provide any advice to the recipient.

If you would like further advice, please do not hesitate to contact us and we will be happy to assist.