We’ve seen an increase in the number of clients seeking advice in relation to making a lifetime transfer of their property or creating a trust/right to reside in their property in their lifetimes.

More often than not, their primary aim in doing so is for tax and future planning purposes.

That’s a wise aim, but it’s more complicated than that.

Read the article below for a recent horror story and what it means to you.

When things go wrong

A Mother (82) lived with her daughter (52). The Mother had owned the house in London, for 40 years. The property was divided into flats – The Mother’s upstairs flat was worth £600,000, while the daughter’s was worth £800,000. A total value of £1.4 million.

To avoid inheritance tax (IHT), the Mother willingly transferred the freehold of the entire building to her daughter in 2004.

However, when the daughter had a child in 2008 it gave rise to tension between the pair, and relations eventually broke down. The daughter argued that the Mother continually harassed her, or example, she made loud noises and created leaks into the daughter’s flat downstairs. The Mother refused to let tradespeople enter the flat to fix the leaks, and also made false calls about her daughter to the police and social services.

Eventually, the daughter sought to have her mother evicted and the case went to court in 2022.

The judge decided that transferring ownership of the property had been an outright gift, and that the Mother was obliged to vacate the upstairs flat and pay £10,000 in costs.

What this means to you

Things might be OK between all parties at the moment, but it’s important to recognise that, not only can family relationships break down, but people can also go bankrupt, or get divorced, or lose mental capacity or die before you. Any of these events could either change what you want to happen to your assets or mean that the asset is unintentionally owned by a third party. If you have gifted the asset out of your name, you would no longer be able to exercise any control over it.

Inheritance tax and future planning go beyond just financial considerations. As with many areas of life, where there are advantages there are also disadvantages. You should therefore take professional advice on all the implications of transferring the ownership of your property before proceeding to do so.

Tax advisers and solicitors (like us) are experienced at thinking of all the ‘what ifs’ and will take steps to protect you.

Related reading

If you found this information useful, you might also like to read our other articles on the subject:

For more information, please get in touch. We’ll be happy to help.