Many people fear that if they need to go into Residential Care they will be forced to sell their own home. As an Englishman’s home is his castle, naturally people want to ensure that their home passes on to their children or grandchildren.

Consequently, many people make the decision to transfer their home to their children. It is important that you obtain independent legal advice on the implications of doing this so that the advantages can be weighed against the disadvantages before an appropriate decision is made.

We want to give our home to our children – is there a problem?

There are a number of pitfalls:

You may still be responsible for building insurance and general maintenance. To avoid future problems, it is necessary to discuss with your children and establish who will pay all the main expenses of the household.

1. Your children may ask you to pay the rent. The only way to avoid this would be to have a lease in your favor or a Declaration of Trust from your children.
2. If your children divorce or file for bankruptcy, your former spouse or bankruptcy trustee could claim your home.
3. If your children use the house as collateral for a mortgage, then it could find itself in the hands of the Bank/Building Company in the event of repossession.
4. Problems can arise if your children predecease you and no provision has been made in your will. You could be homeless. The donation may affect your position in the Inheritance Tax. Inheritance tax may be payable if a person dies leaving an estate of more than £325,000 (tax year 2009-2010).
5. There are complicated tax implications if you transfer your house and you still live in the property and your estate, including the value of the house, is worth more than £325,000 (tax year 2009-2010).
6. The Transfer may affect your children’s Capital Gains Tax position. If you own and live in your own home, no capital gains tax is payable when you transfer ownership on any gains made on the original purchase or acquisition price. Your children will acquire the property at its current market value. Your children may have to pay capital gains tax when they finally dispose of the property and should get independent advice on the implications.
7. If the responsibility behind donation is simply to avoid residential care fees, then local authorities have powers to set aside donations made within a certain period of time before entering residential care, and they can also use the powers of insolvency. Different local authorities have different views on how far back they can check.
8. If you receive a state means-tested benefit and give away your home, the Benefits Agency has much broader powers than the Local Authorities.

It is therefore very important to obtain legal advice before giving away your property, and your children should be advised to seek independent advice as well.

What about giving away half the property?

Most people own their property as co-owners. This means that when one of them dies, the property will pass to the survivor. Alternatively, you can break up your joint tenancy, so that the property is owned by the tenants in common. You can then gift your share during your lifetime, or put it in trust for the next generation, or dispose of it by your will.

This would have an important advantage in that if the surviving spouse needs to go into Residential Care, the Authorities would only be able to take into account half of that person’s property, and not all of it.

How about buying a property with my children?

There may be issues in that your children could be forced to leave the property if you go into a nursing home or residential home. You will need to carefully consider whether an intergenerational home is likely to work.
It would be wise to seek legal advice about putting the house in trust to avoid having your name on the title deeds.

Protected Housing

Sheltered Housing complexes for people over fifty-five or sixty-five present very different problems.
These purchases are often quite expensive and there are restrictions on who can buy the property, who can live there, and issues related to pets and future sales. You will need to check service charges and ground rents, how and when they can be increased.

You will need to check whether the property can be occupied by your child or children if they were to reside with you to care for you, or if you have a younger wife/husband, whether she/he could continue to live there after your death. A system of qualified buyers usually works, that is, you can only sell to the management company, or to people of a certain age, group or type. This can severely restrict the purchase price. In all matters relating to property, you should obtain full legal advice before making any formal decisions.