Can I sign my house over to my daughter in the UK? Yes, you can sign your house over to your daughter in the UK. Many people gift their home or other property they own to their children. You might want to minimise Inheritance Tax or help get them onto the property ladder.
Yet the process isn’t always easy. There are also alternatives to the most common method of gifting – not to mention potential downsides of signing over your house to your daughter or son in full.
Here is a thorough grounding in the rules surrounding transferring ownership of your house to your children:
Can I Transfer Ownership Of My House To My Daughter In The UK?
In the UK you can indeed transfer ownership of your house to any of your children. The most popular way to do this is by the legal process of “gifting”. There are a few reasons why you might want to do this:
- Give them a rung on the property ladder – most young people these days cannot afford to buy property of any kind without some form of assistance from their parents.
- Minimise Inheritance Tax – Inheritance Tax applies to assets valued over £325 000 (or £650 000 for couples) and starts at a rate of 40%. Gifting property to your daughter or son is a potential way to minimise this tax. This is because property tends to be the most valuable asset a person owns.
How Does Gifting Property To My Daughter Minimise Inheritance Tax?
Gifting your entire house to your daughter is known as a “Transfer by Way of Deed of Gift”. This can minimise – and in some cases completely eliminate – the amount of Inheritance Tax due.
However, this is not unconditional. If you continue to derive any benefit from the property (the most common example is continuing to live in it), it is likely any mitigation of Inheritance Tax will be either minimal or zero. This means you will normally need to:
- Pay rent or not live in the property – you cannot live in the property without paying rent in line with the average local rate. Not paying rent cancels the exemption from Inheritance Tax.
- Live for 3-7 years or more – a “gift” takes a certain period to come into effect. Inheritance Tax due only begins to be reduced starting three years after you’ve gifted it. Every year after that up to seven years, the amount due is reduced. This is called “tapered relief”.
- Sell it for the going market rate – you also can’t try to sell your house to any of your children at a reduced rate. Or rather, you can. But any minimisation of Inheritance Tax is likely to be offset by the difference in market rate and the price they paid.
The above stipulation that you are no longer the primary householder of a home you’ve gifted is an important one. The rules relating to it are known as GROB (Gift with Reservation of Benefit).
Make no mistake, these rules can be quite complex. If you are planning to do this, it is a very good idea to speak to a specialist solicitor to get legal advice before you proceed.
Can I Sign My House Over To My Daughter And Still Live In It?
Yes. As we’ve seen, many parents like to sign their houses over to their daughter or son and still live in it. Yet, as we’ve also touched on, there are significant limitations governing the way you can do this if you want to derive any benefits.
Plus, if you are doing this to minimise care home fees, your local council may judge you are doing what is called “a deliberate deprivation of assets” and still take the property into account when setting your fee level.
Can I Put My House In My Children’s Name To Avoid Inheritance Tax?
Yes, you can gift your house to your children in order to minimise or avoid Inheritance Tax. However, those regulations regarding the need to live for another seven years to completely negate the need to pay the tax and not derive any benefit from the gift remain in place.
As an alternative to gifting in full, you might want to sign your house over to your daughter by transferring equity or gifting half (so at least half of the value is not subject to Inheritance Tax) and splitting the bills.
Considerations And Risks When Gifting Property To Your Children
As well as those specific rules and regulations, it is important to bear in mind that there are certain considerations and risks of gifting property to your children:
- No rights – you are no longer the legal homeowner and no longer have any rights to the property. If you were to have any serious disagreement, they would be allowed to evict you (hopefully this would never happen, but it has been known to).
- Subject to settlement – if your child was to be part of a divorce battle, for example, the house might be sold as part of the settlement.
- Financial costs – if you are transferring equity, the person receiving the equity might still have to pay Stamp Duty or Capital Gains Tax.
All in all, the complexity of signing your house over to your daughter or son makes consulting a specialist solicitor before you start a vital step in the process.
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