Have you thought about giving away your home?

Have you thought about giving away your home?
Increasingly many people are looking to transfer their home, usually into their children’s names. But giving your home away can be fraught with potential dangers. 
There are may reasons why people may look to transfer their property across to their dependents, and with the value of property rising so significantly over the last decade there is concern that this decision is not taken with due care. The prime reason seems to be the fear of losing their home to pay for care fees if they end up in care in the future or an attempt to try to avoid inheritance tax. Ultimately it is important that the implications of transferring your home are fully understood prior to making any decision, so that the value of those assets can be fully protected.
Here is some useful advice...
Responsibility for the home
Although legally you may give your home away, you may agree to be responsible for the buildings insurance and general maintenance.
You might be quite happy with the responsibility, but what may seem straightforward in the early stages could cause problems later on if you cannot financially afford to continue these payments.
To prevent future problems, it is essential to discuss and establish who is to pay for all major outgoings of the property.
Although it is your home, if you no longer own it you could be asked to pay a full market rent by the owner. They may even sell the property and you could be left with no home.
If the person you have transferred your home to was to become divorced or bankrupt, their ex-spouse or trustee in bankruptcy could have a claim on your home and you could end up homeless.
Consider if this is likely, and ask your family questions to see if there is a real risk. Similar problems can arise if the person to whom you transfer your property dies before you do.
Once your home has been transferred out of your name, it will not form part of your estate, and when you die it will not be disposed of in your will.
This may save on probate court fees and administrative costs to your estate when you die. It may, however, still be added to the value of your estate for inheritance tax purposes.
Also it is essential that the person to whom you transfer your home makes provision for your continued occupancy within their own will should they die before you. Otherwise, again you may be forced out of your home.
Inheritance Tax
Inheritance tax may be payable on your death on assets including savings, investments and property over £325,000 (for the 2011/12 tax year).
Tax is payable on the amount over this figure at 40%. If you have made gifts of money or assets in your lifetime over £3000 and within seven years of your death, the value of these gifts may be added to whatever other assets that you own when you die to determine the tax that is payable.
There are complicated tax implications if you transfer your home and still live in the property when your assets, including the value of your home, are worth over the nil rate band. If your estate is likely to be taxable, it is important to get tax planning advice before transferring your home.
Capital Gains Tax
If you own your own home and live there, no capital gains tax is payable when you transfer the ownership on any gain that is made on the original purchase or acquisition price. 
The person that you transfer your home to will acquire it at the current market value. There may be tax payable by them when they eventually dispose of the property, and they should obtain independent legal advice on the implications.
Means tested state benefit
If you are in receipt of means tested state benefits, such as income support, and you give away an asset such as your home, the Department of Works and Pensions (DWP) may see it as an attempt to reduce your assets so as to qualify for certain benefits and may assess you as if you still own the asset. Similar rules apply to financial help which may be available from local authorities, for example if you need to move into a care home.
If at a later date you apply for financial assistance from the DWP or local authority, depending on how much time has passed since the transfer, the value of the asset may be ignored when assessing your entitlement to financial support.
If transferring your home is something that you have thought about then make sure you take independent legal advice before making your decision. What seems like a simple decision now may have more serious implications further down the line if consideration has not been given to key points. Whether you’re looking at care home costs or inheritance tax issues, consideration will need to be given to whether you still wish to proceed, and you should speak to a specialist who fully understands the legalities of the decision that you are faced with.