After investigating some plausible and not particularly plausible fates for Henry Taylor, who used to work in Jim Stringer's job on the Necropolis railway, thoughts turned again to cake. Alison, a fairly quiet member of the group, could really bake and brought in an excellent coffee cake. While everyone else was munching away, Alison wasn't tucking in so much.
"Something on your mind Alison?" asked Mary. "Actually, yes there is. All this talk about gifting has got me thinking. I don't have Inheritance Tax problems like Dorothy did but I am a bit worried about care fees. My mum went into care after dad died and there wasn't much left, which is probably why I don't have an Inheritance Tax problem! I am wondering about whether to give my house to my daughter so that she doesn't have to pay care fees". "Funny you should say that" said Pam "but I have been looking at that myself. I asked Wrigleys Solicitors for some information and they sent me a really good guidebook. I say good but it actually made for quite frightening reading. Did you know that if you give your house to your daughter and she got divorced then it would count as part of her money in the divorce? Or if she went bankrupt then her creditors would be able to get hold of your house. Oh and apparently if the house goes up in value after the gift you have to pay Capital Gains Tax on the increase because it isn't your house any more". "What do you mean?" asked Alison. "Well, we all own our own houses don't we?" "Yes" everyone chorused. "And have we ever had to pay Capital Gains Tax when we sold one and bought another?" "No, I suppose not" said Mary. "Well, that's because there is a tax break called Principal Private Residence Exemption. If the house you live in as your main residence goes up in value, you don't pay tax". "Thank goodness for that" said Pam, "I bought mine in 1960 but that wouldn't work if you had given your property away into someone else's name. That and all the problems we talked about with Gladys a couple of weeks ago, not having any rights over your own house". "That doesn't seem like a good idea at all" said Alison. "Perhaps I'll think again, and perhaps I'll have a slice of cake now".
Comment
Giving your home away outright is rarely a good idea if you want to keep living in it. When you give your house away, you give away all of your rights over it and the people you give it to might have the best of intentions now but might change their mind later or they might have no choice, if they divorce or become bankrupt.
Sometimes people feel that they shouldn't own a property outright and that it should have been left by somebody else in a different way. In that situation it is worth exploring a trust. For example, a lady inherited a house from her husband who had bought it with money from an industrial accident. He had said to her that he wanted her to have the house for life but that it needed to go to their sons after that. He was probably thinking more of her getting remarried and leaving it to a new husband but she felt very strongly that she ought to carry out his wishes even though he hadn't put them in his Will. She set up a trust along the lines of what he would have put in his Will to carry out those wishes.
If you are thinking about any gifting, particularly where it involves something as important and valuable as your house, it is really important to take expert legal advice.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
