Legal case highlights the implications of gifting property to children

Can I gift my house to my children? This is a question that comes up a lot in conversations with potential clients and always needs careful consideration.

In the UK, whilst you can legally gift your house to your children and still live in it, there are several tax consequences and potential risks in doing so.

A mother and her daughter lived in the same converted home in London in adjoining upstairs and downstairs flats.

In 2004 the mother transferred her upstairs flat into her daughter’s name – without even telling her – hoping to avoid inheritance tax. However, later in 2008 relations broke down between them. Following the breakdown of their relationship the mother allegedly continued to refuse access to allow maintenance of the upstairs flat and this lead to the daughter handing her an eviction notice last November.

The matter went before a Judge at the county court where the mother claimed that her daughter had ‘tricked’ her into signing the flat over. The Judge rejected her claim, finding that the mother had willingly transferred the £600,000 flat to her daughter as a ‘gift’ to avoid inheritance tax – but without even telling her she was doing so.

The case returned to court last week as the daughter sought to get her mother out of the upstairs flat and hand over the keys.

The mother fought the application and her barrister argued that she would never have transferred the flat to her daughter if she thought she could be evicted. She said she had always had an ‘expectation to live there for the rest of her life’ and that that must have been part of any agreement to transfer it.

Following a long legal fight, a Judge ordered that the mother must leave her home of more than 40 years. The judge also ordered the mother to pay £10,000 up front on account of her daughter’s legal costs, which she says amount to £28,000.

If you are looking for advice about estate planning or inheritance tax, do contact our Private Client team here who would be happy to help to find the best option for you and your family.