Gifting the Family Home: What You Really Need to Know
When Laurence Llewelyn-Bowen recently revealed he’d transferred ownership of his Cotswolds home to his sons-in-law, it made headlines and raised eyebrows.
In his own words, it was part of a conscious lifestyle decision after a personal health scare. He also acknowledged, with humour, the process of proving to solicitors that he wasn’t being coerced. That might have raised a few laughs, but the legal checks to guard against undue influence and financial abuse are vital, particularly when significant assets like the family home are involved.
For me as a professional, stories like these are timely reminders of how much confusion still exists around lifetime gifts of property. My team and I regularly speak to clients who say:
“I want to give my house to my children – to save tax or protect it from care fees.”
But the reality of doing so is far more complex and the consequences can be serious, especially when decisions are made without full advice.
Tax traps and costly misunderstandings
One of the most persistent misconceptions is that if you give your home away and live another seven years, it will be outside your estate for Inheritance Tax (IHT). But unless you also move out or pay full market rent (and can demonstrate that you have met stringent conditions), the gift will be ineffective for IHT purposes. HMRC will still treat the house as part of your estate.
Another common misunderstanding is that gifting the home guarantees protection from care fees. In reality, such a gift may be classed as a deliberate deprivation of assets, especially where there is no other clear motive. That means the property could still be taken into account in financial assessments by the local authority.
And beyond those myths lie further risks.
Unnecessary Capital Gains Tax (CGT) liabilities. If the property is gifted and later sold by the recipient, CGT is assessed based on the market value at the time of the gift, not the donor’s death. By contrast, had the property passed on death, the recipient would benefit from a full CGT uplift, often avoiding any liability altogether.
We also see issues with Stamp Duty Land Tax (SDLT). If the property has a mortgage when gifted, Stamp Duty Land Tax (SDLT) may apply. And if your children already own a property, the gift could trigger higher-rate SDLT on any future purchase.
No tax saving – and sometimes a tax bill created
We often meet clients who want to gift their home to “save IHT”, but when we review their position properly, we find that there may be no IHT issue at all once allowances are taken into account.
A married couple leaving their home to children under their wills may benefit from a combined IHT allowance of up to £1 million. In some cases, that figure can be even higher if one or both have previously been widowed and inherited unused allowances.
That’s why the first step should always be a proper IHT review.
Making a lifetime gift could mean creating a new tax exposure – or worse, turning a situation with no IHT into one with a CGT or SDLT liability and no benefit at all.
Gifting your home: rarely recommended.
Loss of control and increased exposure.
We’re often asked if gifting the family home is a good idea. In practice, we rarely recommend it.
One of the most concerning (and least considered) outcomes is loss of control. Once a property is legally transferred, the original owner no longer has legal rights over it. If the recipient divorces, becomes bankrupt, dies, or simply changes their mind, the donor could lose their home. Many clients are certain their children would never do this, however circumstances can come into play that are beyond their control.
It’s a reality that many families haven’t considered until it’s too late. The legal and financial risks are significant. You lose control, flexibility, and legal protection. Your children inherit tax complications and exposure to their own risks, from divorce or bankruptcy to family disputes.
And all too often, there is no actual tax saving to justify those risks.
A word on lifetime trusts
We’ve also seen a rise in clients being sold lifetime trusts to hold their home. These are not the same as will trusts and are often marketed as a way to avoid tax or care fees.
In our experience, these arrangements are frequently misunderstood, poorly documented, and ineffective. Many clients come to us asking for help unpicking trusts that were never right for them. Sadly, these schemes are often sold without a clear understanding of how they work or the impact they may have, including the loss of the residence nil rate band and potential tax or access issues.
What does work?
There are safer, smarter ways to protect your home and your family.
Life interest trust wills can protect your property (if in your sole name) or your share of it (if co-owned) for children while allowing a spouse or partner to live there for life. They can safeguard inheritance from remarriage or care fees after the first death, and they don’t create immediate tax consequences.
Discretionary trust wills can also be powerful tools, particularly for couples who aren’t married or those with vulnerable beneficiaries. They allow flexibility in how assets are distributed and help maximise available IHT allowances.
Tailored advice matters
Every family is different. There is no one-size-fits-all answer to estate planning and there certainly isn’t one for whether you should give your home away. The right estate plan requires an understanding of your assets, your goals, your family dynamics, and the tax rules that apply.
Gifting the family home is a big decision, not just financially, but personally. In the vast majority of cases, it’s not the right solution. There are safer and more effective ways to support the people you love without putting your own security at risk.
If you’re considering a lifetime gift or have been advised to put your property into trust, please seek tailored legal advice first. It could save you and your family significant cost, risk and regret later on.
Thinking of giving your home away? Let’s talk first.