Why should I not gift my property to my children?

Gifting your property to your children might seem like a generous and caring gesture, but it comes with potential drawbacks and risks. Here’s a summary of why it might not be the best decision:

1. Loss of Control

• Once you gift the property, you no longer have legal control over it. Your children can sell, mortgage, or use it as they see fit, which might not align with your wishes.

2. Tax Implications

• Gift Tax: If you do not survive 7 years then this is potentially a taxable gift
• Capital Gains Tax: Your children may face a significant tax burden when they sell the property. This is because they inherit your original cost basis rather than benefiting from a ‘death value uplift’. This applies when they inherit the property after your death.

3. Potential Financial Risks

• If your children face financial difficulties, creditors could claim the gifted property as part of their assets.
• Divorce settlements may also include the property as a marital asset, potentially forcing its sale or transfer.

4. Impact on Your Finances

• Giving away property could compromise your financial security, especially if you rely on it as an asset or source of income (e.g., rental property).
• If you need to go into a care home, gifting the property may mean you do not have the value of the property to fund your care which can affect the quality of home you can go to. In some scenarios, if you are not paying market rent, then it could be deemed a deliberate deprivation of the asset and the gift made void. Thos would therefore mean the authorities will put the property back into the equation when assessing how much funding you will get for care.

5. Family Disputes

• Gifting property to one or more children can lead to resentment or disputes among family members, particularly if others feel unfairly treated or excluded.

6. Reversal Difficulties

• Undoing a gift is legally complex, and your children are not obligated to return the property, even if your circumstances change.

Alternative Approaches:

• Estate Planning Tools: Consider trusts, wills, or joint ownership with a retained life interest. These options allow you to maintain control and reduce tax burdens.
• Discuss with Professionals: Consult a lawyer or financial advisor to explore solutions tailored to your goals and circumstances.

By avoiding an outright gift of your property, you can maintain control, minimise risks, and ensure your actions align with long-term financial and family harmony.