Making over my house to only child ?

Once some one inherits doesn't that inhertance then become part of their 'estate' should anything happen to them, or in the event of a divorce etc? I'm sure someone who knows more will along soon...

I'm not sure how making it a condition of a will that children's spouses should not inherit word work in practice. Your son could marry and choose to give half of his inheritance to his wife, or to the local cat's home if he so wished!

If you gift your house, or anything else, to your son, it is then his property to do with as he wishes.

Thank you tanith and Ana for your replies. Of course something to consider.

Concentrating on the 'gift' of my house to him now (hoping I live the 7 years to avoid inheritance tax) what advice do others have about doing this now?

I realise that the HMRC rules change. I'm not sure what the IT limit is now, but I just resent what was 40% of ones estate being paid in IT.

Isn't it the case that if you gift your house to a child, you then have to pay a commercial rent on your own house to him? The Law was changed some years back- the rent has to be in line with the local market and not just a token. If someone finds a link to this effect, I'd be grateful.

Greymary sounds a good idea in theory, but may not be so in practice.

1) How much is you house worth. You do not say whether you are widowed/single or divorced. If you are widowed the total tax allowance for your husband's and your estate is £635,000. Otherwise it is £325,000. Does the value of your house and savings substantially exceed these two possible IT levels?

2)You do not pay 40% on the full estate, only on the part above the Inheritance Tax allowance.

3) Many a parent has trusted their DS/DD implicitly and made the house over to them - and then sometime later ended on the street.

4) You do not say whether your son lives with you. If his home is elsewhere and you remain in the house on your own, HMRC will not recognise the transfer unless you pay your son the full market rent, with proper rental agreement etc etc, otherwise it will be treated as if the transfer is void. Can you afford to pay the market rent?

5) If your son was to become bankrupt, you cannot guarentee this will never happen, then the house will have to be sold, whether you live there or not

6) If you later need Social Care paid by the Council, they may well decide that you transferred the house to your son to avoid it being used to pay for your care and the transfer will be declared void and the house will have to be sold to fund your care. Now that Social Services have less and less money they are getting more and more keen on doing this.

7) In fact the whole idea, simple though it seems, is an absolute mine field. Take lots of legal advice from a specialist solicitor before taking a step in this direction.

should be £650,000

Here is a link to info on Inheritance Tax and gifts. The limit before tax is payable is £325,000.

www.gov.uk/inheritance-tax/gifts

Thank you MOnica. Much to consider, in fact your point (3) happened to my own grandmother.

I am a widow. I live in what is a very desirable Cornish coastal village in a 16th C cottage.

I also have a property abroad which I am considering putting on the market soon (due to my mobility problems and age).

I hope this isn't too much information, but personally I live quite frugally yet do wish what I now own to belong, tax free to my only son.

Reaching old age has many problems.

Pehaps I should says that I know of a neighbour (much older than myself) whose son actually lives in the cottage she owns (second home to her) . She refuses to gift it to him in case he becomes bankrupt.

If she's worried that it's likely, perhaps she should think about leaving her property to another relative.

I would certainly start with selling the property abroad as this only complicates the situation. Monica gives sound advice. I would add 8) don't "give"anything to your son without protecting your own interests. You never know when you might need to get your hands on a large sum and there's no going back once you have parted with your house.
It's a gamble you take. My DM didn't live long after giving us her house so we had to pay up. They seem to get you all ways.

Greymary the one thing to say in favour of this, is that houses, at the moment, are assets which are steadily increasing in value, while interest rates on monetary assets do not even keep up with inflation. Giving the house to your son will remove any increased value in the house from your estate.

If you invested the money from the sale of your holiday home - and it was a substantial sum, say £100,000 or more, and you did not spend it, if at any time Social Services came after the house you could argue that you had set aside substantial monterary assets to meet any costs of care and that proved that when you gave the house to your son, your intention was not to avoid paying care fees.

However, given all the caveats in my previous post. I think I would look for alternative ways of avoiding IT or just grit my teeth and accept that IT would have to be paid.

I might add, I knew someone who shared the ownership of his house with his two children to avoid IT. He continued to live in the house but paid his children a market rent for their share but then lived far longer than he ever thought he would. He was 90 when I, as a Benefits Advisor for a charity, met him

He lived in an area where rents had been spiralling upwards and the house he only part owned was large and expensive and the rent was high. He had reached a point where the rent he had to pay his children exceeded his total pension income. HMRC required an estate agents rental valuation every year and proof he was paying the market rent to his children so there was no way he could avoid paying it.

It made me realise the unforseen consequences that can arise from seemingly straight forward, entirely legal, tax avoidance schemes.

Thank you all, specially MOnica , for the advice.
Who would have thought buying an old cottage for £20,000 so many years ago would lead to concern about Inheritance Tax.

I shall speak to my so!icitor and tax advisor after all your suggestions. Are we a generation of asset rich, cash poor?

In 2007 when the law was changed, only 6% estates were liable for IT. I was surprised to read in 2014/15 the percentage was 5%. I expected it to be higher because of property values in the South East.

If you continue to live in the house it is treated as a gift with reservation of benefit and will be liable to inheritance tax on your death. However there is a CGT uplift so no capital gains to pay. The transferable nil rate band totals £650,000 not £635,000 and will increase to £1m between 2017 and 2021.

As someone has said, in order for it to fall outside of IHT you would have to pay your son full market rent.

If it is gifted to him you lose control and it can pass to his spouse, or to the official receiver if he becomes insolvent (even if you are living in it).

You should consider having a trust written into your Will, if you want to control where the house goes after your death.

Right off post but for the benefit of all reading this have you thought about what would happen to your estate if you died before your spouse? My concern is that DH might remarry and not make a new will which would mean his new wife would get everything in the event of his death. Obviously I would want my money to go to my children but as yet have found no way round it which doesn't deprive DH.

Bear in mind that if you gift your house to your son and then require residential or nursing home care yourself, the LA can look into the situation as regards disposing of capital to avoid paying for your care. There is no exact time period for this and LAs investigate and make their own decisions.

Nonnie, there is an easy answer to your dilemma. Change the way you own your house to tenants in common, so that you each own a share in it. Then make new Wills creating a property trust giving each other the right to live in the house, and downsize if wanted, for the rest of the survivor's lifetime. After the second death your interest in the house passes to your children. Even if DH remarried and changed his Will all he can leave to a new wife is his half.
The other advantage is that if the survivor goes into care only their half of the property can be assessed for means testing, the other half cannot be taken to pay for care.

OP is widowed and has been for 10 years.

Sorry just noticed last post was directed to Nonnie and not OP.

Is your son living with you? If so the tenants in common idea mentioned above might be a good idea but if he were to meet and get married to someone you don't get on with, your life could be hell. Unless you have health problems, 69 is still young, you could be around for another 20 years, you might even get married again!

When my father died, he left his half of his house to me and 2 sisters. Mum owns the other half. There was stipulation in his will that mother would live in the house until she died. (We were not thinking of chucking her out on the street, but for anyone who is not entirely sure of their relatives, this is easily put in the will).