By Juliet Phillips-James, Director, Gomer Williams (as featured in the Llanelli Star)
Q: I am thinking of gifting my property to my children. What are the implications of doing this and how can I protect my right to live there?
A: Gifting your property to your children, while it is a relatively straightforward document to prepare, does have numerous legal and tax implications which need consideration prior to making the decision to proceed.
There are a variety of ways you can transfer your property, however. If you want the right to remain at the property it is likely that the best way to proceed would be to gift the property subject to your right to live there for life (known as a life interest).
You and your children will have several issues to consider.
Firstly for you, there will be a loss of control over the property, in that if you wish to sell it, you will need the co-operation of your children. They must then reinvest the capital for your benefit.
Secondly, if your children were to get divorced or become bankrupt, the property would form part of your children's assets for the purposes of any claims from the soon to be ex-spouse or creditors owed money. However, they would still be bound by your life interest.
A third issue is avoiding residential care fees. Often this is the main reason for people wanting to gift their property. There is case law which states that there is no time limit on the local authority in determining whether a person has deliberately deprived themselves of an asset to avoid paying fees. The greater the length of time that has lapsed between the gift and going into a residential home, the harder it will be for the local authority to try to argue that this was the intention of the gift.
Fourthly, there are potential inheritance tax and capital gains tax implications associated with gifting the property.
It is therefore imperative that both you and your children seek financial and legal advice before deciding whether or not to proceed.