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Can I gift or transfer my property to my children?

View profile for Caroline Johnstone
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Many people consider transferring their property to their children during their lifetime, with one of the main reasons being that it is perceived as a way to avoid care home fees in the future.  It is very rarely this straightforward, and there are many factors to review.  Caroline Johnstone, Associate Solicitor in our Private Client team, explains what these factors are and the best way you can plan for the future.

Avoiding care home fees by transferring property

This is one of the most common reasons that people consider gifting property; as if you have over £23,250 then you will be required to pay your own fees in full (known as being self funding).

It is a common myth that by gifting your property which, in most cases, will be the main asset in your estate, then you will fall below the threshold of £23,250 and be able to rely on the Local Authority to fund your care.  It is important to know that the Local Authority complete thorough checks on your history and transactions of this nature, and could view this as a “deliberate deprivation of assets”.   If the Local Authority takes this view, they will assess you as if you still had the property that you have given away.

Gifting property, Inheritance Tax and Capital Gains Tax

If you are thinking about transferring your property to your child to minimise the likelihood of Inheritance Tax being payable on your estate then you must be aware that when gifting a property, if you continue living in the property, you are still retaining an interest in it and so it would still form a part of your estate for Inheritance Tax purposes.  This is called “a gift with reservation of benefit”.  You can avoid this by paying rent to your children for staying in the property, which would need to be at the full market rent, or by moving out.

Also, if you make a gift of the property which is not a gift with reservation of benefit and you unfortunately pass away within seven years of doing so, the value of such gift is counted towards the value of your estate for Inheritance Tax purposes.

Capital Gains Tax may also be payable in the future if the property is not a “principal primary residence.”   If you transfer the property to your child and they do not live in the property, upon selling it, they could be subject to Capital Gains Tax if the value of the property has increased since the transfer. 

Consequences of the transfer of property

“In addition to all that is listed here, it is most important that you must remember that you will be giving up the legal rights of owning the property,” explains Caroline.  “You will therefore have no legal right over what your child does with the property; other parties could have legitimate claims on the property, for example if your child gets divorced, you will see no financial reward if they sell the property or use it as a rental income, the property would be included as an asset if they are declared bankrupt, and you could even be evicted if you fall out with your children.”

Alternatives to gifting property to children

There are several other options available to you, depending on the reason behind gifting the property in the first place.  One may be to sell your property and gift the proceeds to your children, although you would need to bear in mind that this would still be subject to Inheritance Tax if you were to pass away within seven years of the gift.

The main alternative to gifting property is to create a Life Interest Trust Will.  Under this type of Will, both you and your spouse would hold a separate share in your property, usually 50%.  If your spouse were to pass away, under a Life Interest Trust Will, their half would be placed in the trust, securing it for your children whilst specifying that you can remain in the house for the rest of your life, or until you need to go into a care home. 

Whereas under a standard Will, the half of the property owned by your spouse would automatically pass to you, forming a part of your estate.

Caroline concludes, “Understanding the best option for you when it comes to estate planning will be dependent on your own personal situation and family arrangements.  We would always recommend you seek legal advice if you are considering gifting property to your children as there are so many different things to consider.”

To contact Caroline or a member of the Private Client team, call 01329 222075 or email  Alternatively, you may find the following resources useful:


This is for information purposes only and is no substitute for, and should not be interpreted as, legal advice.  All content was correct at the time of publishing and we cannot be held responsible for any changes that may invalidate this article.