Transferring property to your children as a gift
If you are thinking about transferring property to your children as a gift, there are a number of legal issues that are important to consider.
First, you should bear in mind that the process is broadly the same as any other property transfer. You (and any co-owner) will be the registered owner of the property, so a deed of transfer will need to be completed to enable the name of your children to be entered on the title at HM Land Registry. However, you and your child/children may decide that some of the searches that are normally carried out when a property is purchased at ‘arm’s length’ are unnecessary.
Where the property is mortgaged then you will normally be required to pay this off before the transfer is made.
Some parents when transferring property to their children decide to remain co-owners. If this is the case then it is important to decide what percentage share will be retained and whether the property will be held as tenants in common or as joint tenants.
In some situations, a Declaration of Trust may be required, and this will certainly be the case if your children are under the age of 18.
Another option you have as a parent transferring property to your children is to create a limited company in which both you and your children can hold shares. However, it is important to seek advice on the tax implications of this as well as the costs of administering the company.
Even if a company structure is not used you should nevertheless consider the tax implications of the gift, particularly in terms of CGT and IHT, as well as SDLT.
Where you do not retain an interest in the property it is important to bear in mind that once it has been signed over then you will no longer have any control over it in the future, even if you are still living there. You should therefore consider your position very carefully. Our conveyancing solicitors are highly experienced in dealing with these transactions and will be happy to talk it through with you. They can for instance offer guidance on what would happen if your child were to get divorced, become bankrupt or even pass away before you.
Some parents transfer their property in order to avoid care home fees. However, it is advisable to discuss this with us as the arrangements might be seen as a deliberate deprivation of assets, which could render the step ineffective.
Another legal complication to be aware of is where a transfer can be classed as a ‘gift with reservation of benefit’, or GWROB. This occurs where you retain a legal right to continue benefitting from the property. This will have tax implications where the property is treated as remaining part of your estate on your death.
For expert guidance on transferring property to your children, contact our residential property team today