Signing a House Over To a Child? NOT a Good Idea!

I'm going to sign my house over to my eldest child. How many times have you heard someone make this statement? Every time it is said, it is said with great pride and joy. But it is far from being a clever thing to do. In fact it can have very serious consequences. Let me explain some of the potential threats. I am directing this article at those who believe that their home is their castle and their castle is their legacy to their children.

First of all, I would like to say that signing your house over to one of your children is a very kind and generous thing to do. However you may not be prepared for the Government's response. We must all agree that signing a house over to a child is done for a reason. I mean, you don't get out of bed one morning and announce to the world that you feel bit bored and so will sign your house over to one of your children because you have nothing better to do. NO! The Government takes the view that you have done this to evade taxation or to deny the Local Authority the ability to recover the costs of long-term care like the cost of nursing home fees. In fact they are so upset by you signing your house over to one of your children that they believe you may have committed a crime. They even give the crime a name: The Deliberate Deprivation of Assets. If you have done this within six months of going into care then your guilt is assumed. After that, the local authority must prove your guilt. This can be very upsetting particularly if you are of the opinion that the house is yours because you have paid off the mortgage. The house is not ring-fenced. It is your asset and thus subject to taxation and assessment. There are things you can do to protect your home from being used to pay nursing home fees etc. but advice on this is given on an individual basis.

Secondly, what if you sign your house over to a child and that child already has their own house. Now the child has two houses, one of which is their primary residence while the other (your former house) isn't. Should that child decide to sell the house at a later date then they could be subject to paying Capital Gains Tax (C.G.T.). In other words, you have taken a property on which there was no tax after sale, and placed it in an environment where there could be tax to pay. That is not much of a strategy.

Thirdly, by signing your house over to a child you are effectively homeless. That child can legally sell the house out from under you. The house that you spent so many years paying off is no longer yours.

So please don't be tempted to sign your house over to your child. Talk to someone before making any rash decisions.