to the channel. Today we're tackling a really
important and often misunderstood topic that
could have huge implications for your future
and your family's financial security. The idea
of handing over the deeds of your house to your
children typically with the aim of either avoiding
care home fees or maybe inheritance tax. Now
on the surface it sounds like a clever idea doesn't
it? Give the house to the kids and then it's
out of your estate and you can save the fortune
down the line. But I'm here to tell you that
while the intention may be good, the reality
can be fraught with very serious and sometimes
devastating risks. And these are just minor hiccups.
They could mean you lose control of your home
or even lose your home entirely. So let's break
down why this seemingly Smart move can be a very
dangerous gamble. So the first thing we'll talk
about is the deprivation of assets trap. First
up, care home fees. Many people across the UK
worry about the soaring costs of long -term care.
The thought is, if you give away your house to
local authority, can't count it when assessing
your ability to pay care, right? Wrong. Now this
is where the deprivation of asset rule comes
in. If the local authority believes you may have
deliberately given away your home to avoid care
fees they can still include the value of that
property in their financial assessments and they
can do this retrospectively. Looking back many
years typically if you transfer the asset within
seven years of need and care It's a very high
risk, even if it's outside the seven year window
though. If the investigation shows the primary
intention was to avoid care fees, they can still
challenge it. This means you end up needing care
with no house, no funds to pay for it. A truly
awful situation. So next let's look at inheritance
tax. You sell it to care fees, gifting your home
with the So lame of avoiding inheritance tax
also comes with a significant catch. The seven
-year rule again. If you gift your property and
then pass away within seven years, its value
will still be considered part of your estate
for inheritance tax purposes. It's called a potentially
exempt transfer or a pet. If you survive those
seven years, then yes, it's generally out of
your estate for IHT, but that's a long time to
waste, and there's no guarantees in life. Plus,
during those seven years, if you continue to
live in the house without paying a market rent
to your children, it could be classed as a gift
with reservation of benefits and still included
in your state, no matter how long ago you made
the transfer. Now, once you transfer those deeds,
it's no longer your house. You no longer... legally
own it. This means you can't sell it without
your children's consent. Now what if you change
your mind? What if you want to downsize or you
need to release equity for your own needs? You're
at the mercy of your children. You can't borrow
against it. No more equity release to fund your
retirement or unexpected expenses. Your children
could ask you to leave. While hopefully that's
unthinkable for most families, legally they could.
It's their house. Now the fourth pitfall I want
to talk about is your children's lives become
your risks. In other words, your children's problems
are your problems. And this is perhaps the most
overlooked and most dangerous pitfall. When your
children own your home, their financial and their
personal problems become your problems. So let's
talk first about divorce settlements. Now imagine
your child goes through a nasty divorce. A strange
spouse could lay claim to a share of your former
home as part of the divorce settlement. This
happens even if it's the parent's home initially.
The second one is bankruptcy. Say your child
has got a business and it starts to run into
trouble guess what your former home is an asset
that they own and it could be seized and sold
to pay off creditors debt if your child gets
into significant debt creditors could come after
the property that you live in to recover what
they're owed now what about children dying before
you do The property would then form part of their
estate and would pass accordingly to their will
or intestincy rules if they don't have one. This
might mean it goes to a son -in -law or a daughter
-in -law or a grandchild rather than going back
to you or another sibling. Suddenly, your carefully
planned strategy to protect your home has put
has put it directly in the firing line of situations
that are completely beyond your control. Now
pitfall five is family disputes and unforeseen
circumstances. Sadly, family dynamics can change.
What if your relationship with your child sours?
What if... One child is given the house, the
other sibling feels unfairly treated, pleading
to bitter disputes. These gifts can sometimes
create more problems than they solve and constrain
family relationships. So what can we do? Now
this isn't to say that there aren't legitimate
ways to plan for your future and mitigate care
home fees or inheritance tax. There are, but
they're complex and they require careful professional
advice. So we're talking trust here. So setting
up a property and trust can be a viable option
for some, and it can offer a degree of protection
and control. But again, this needs expert legal
advice. And there's also will to estate planning.
A well -drafted will and a comprehensive estate
plan are essential for everyone, regardless of
property ownership. So my advice is to speak
to an independent financial advisor who specializes
in later life planning. They can explore all
your options and help you understand the long
-term implications. Now also, always consult
with a solicitor who specializes in property
law and elder law before you make any decisions
about transferring a home. They can advise you
on the specific rules and the potential pitfalls
in your local area. So the bottom line is this,
your home is likely your biggest asset and your
greatest security. Don't risk losing it or creating
unforeseen problems for yourself and your children
by trying to navigate these complex legal financial
waters alone. The supposed savings often come
with incredibly high and often hidden risks.
I hope this video has given you some food for
thought and if you did find it helpful then please
share it with someone else who might also benefit
from watching it. And if you or somebody you
know is looking at retiring in the next 12 months
or so then don't forget to check out my course.
It's all about the final running. to your retirement
and how to make it a success. Links in the description.