Whilst you might have planned to leave your home in your will, the current state of the housing markets has meant that many parents are signing over their homes whilst they're still alive.
However, do you know the risks of transferring your home to your children during your lifetime?
1) A local authority could ignore the transaction, without limit of time, if they consider that a significant reason for doing it was to avoid paying long term care fees – why else would you give your house to your children and continue to live in it?
2) The value of the house will be added back into your estate and be subject to Inheritance Tax. This will be the case unless Income Tax is paid on the rental value of your home - even if you are not actually paying rent to your children.
3) Unless your children live with you, the house will be subject to Capital Gains Tax on its increased value from the date of the transfer.
4) If your children become involved in a marital dispute or financial difficulties, your home may be considered to be part of theirassets and could form part of any settlement that they have to make.
In order to mitigate the risk of one of these things happening, why not consider an alternative? Transferring assets into a trust during your lifetime is an alternative way of transferring wealth between generations.
If you'd like to find out more, please contact a member of the Institute who is local to you by clicking here.
Free guide to making a will