Gifting Assets

You will need to let us know what it is that you want to achieve by gifting the assets, who you wish to receive them and what assets are involved. We will need to be satisfied that you understand the implications of your proposed transaction.

You should consider the effect the gift could have on your future standard of living and what effect it may have on others who could be expecting to inherit a share of it. It is also important to consider what would happen if the relationship deteriorates between you and the person(s) you make the gift to.

There are also potential complications if you are gifting to several people.

We are not financial advisors or specialists in estate planning, therefore you are strongly advised to seek advice from a specialist. It is not only making the gift that has benefits and risks there are also tax implications that you need to be aware of.

Options, risks and benefits

You need to be aware of other options that are available, for example, if you want a particular person to inherit an asset you should consider making a Will. If you want relief from the worry and responsibility of owning an asset you should consider granting a Lasting Power of Attorney to a family member.

Benefits of transferring assets:

  • You may save money in relation to inheritance tax and administration costs on your death
  • You may avoid the need to sell assets to pay for care fees
  • The asset may not be taken into account if you have to undergo means testing for benefits or publicly funded services
  • You may be relieved of the burden of responsibility for the asset
  • It could reduce delays in processing your estate when you die

Risks in transferring assets:

  • The value of your home may still be taken into account or become relevant in the context of funding long-term care, as there are anti-avoidance measures in relation to means testing
  • If you need to move into a care home but do not have the resources to pay for the care yourself because of making the gift, the local authority may only pay for the basic level of care, leaving you to rely on financial support from others
  • The person you transfer the gift to may not provide the support that was expected, which could result in you suffering
  • If the person you transfer the gift to dies, or runs into financial difficulty and you have continued to live in the property you may be made homeless
  • The relationship between you and the person(s) you transfer the gift to could become hostile
  • If you transfer your home you could be deprived of opportunities to adapt to changing circumstances, eg. downsizing
  • The persons you make the gift to could lose their entitlement to benefits and/or services
  • There could be additional legal fees if the arrangement is challenged

Tax Implications

This is only a brief outline of the issues to consider – you are strongly advised to consult a financial advisor.

Capital Gains Tax

A gift is disposal for capital gains tax purposes. Unless there is a valid exemption or holdover relief is available, the gift may trigger an immediate capital gains tax liability. If the gifted asset is the family home and you continue to live there, the principal private residence relief exemption will be lost unless the person(s) you gift the property to also lives in the property. There will be no automatic uplift to the market value of assets given away for capital gains tax on your death.

Inheritance Tax

There may be no tax saving if you receive the benefit from the asset eg. you continue to live in the home after transferring it to a child. There may be a tax liability if the person(s) you make the gift to dies before you or if you die within seven years of making the gift.

Stamp Duty Land Tax

This may be payable.

Pre-Owned Assets Tax

You may be subject to an income tax charge after the transfer.

Nil-Rate Band

A gift from the estate may result in a reduction to and potential loss of the nil rate band. Beneficiaries of an estate may be burdened with a larger tax bill upon your death.

Residence Nil-Rate Band

If you gift the property you will be unable to use this.

Self-Settled Life Interest Trust

There is now an immediate inheritance tax liability on setting up a trust as well as capital gains tax disposal issues. The  local authority may also look through the trust and include the relevant assets in any means-testing calculations.

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How we can help

You must let us know if you have previously discussed this matter with a different firm of solicitors.

We can only act for you if we are satisfied that you are making the gift freely and you have not been unduly influenced in making your decision.

If you are instructing us with another party for us to act for you jointly, please be aware that we may have to advise one party to seek independent advice.

Our specialist team will be happy to advise you of all the options available to meet your particular circumstances.

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