People often ask whether they can make gifts of their property to family members in order to mitigate tax bills or as a means of providing funding for long-term care.
Unfortunately, unlike giving away an unwanted Christmas jumper you got one year to somebody else, there are risks involved in giving away property which you must be made aware of.
The issues surrounding the gifting of assets are vast. Here at Kerseys we will assess what you are seeking to achieve, clarify your financial circumstances and that you own the actual asset that you wish to give away. We will also assess whether you have the necessary mental capacity to make the gift in the first place and whether you expect to receive anything in return for your gift, for example, giving your house away in return for living there for the rest of your life.
If the reason you wish to make such a gift is to avoid tax, then there are tax implications which we will advise you of and it may be that there is no Inheritance Tax saving after all.
If the gift is to avoid the value of assets being taken into account by the local authority for means testing to pay care home fees, there are risks in relation to the deprivation of assets. This is particularly so if your intention was to deliberately deprive yourself of capital so as to increase your entitlement to financial assistance.
Sometimes it may simply be the case that you do not want to deal with an asset and want to give the responsibility of dealing with that asset to somebody else. In this scenario, then perhaps a Lasting Power of Attorney is a better way to deal with this matter.
Finally, we would also look at the circumstances of the person receiving the gift. They could run into financial difficulties, which could in turn affect your position and you could be made homeless. Furthermore, your relationship with the recipient could deteriorate over time and as you no longer have control over the asset you gifted, this could put you in a vulnerable position.
Always remember that if you have made an outright gift, you cannot demand it back at a later date. The gifting of property is not something to be taken lightly. It is for life and not just for Christmas!
Please contact a member of the Private Client Team if you would like more information about the issues raised in this article.
Leila Murray | Partner
Private Client Department, Kerseys
19 December 2013
Image of gift by Asenat29, Flickr