What you need to know about signing your home over to your children
You are permitted to give your home to your children at any time even if you live in it.
If you were to make an outright gift of your home to your children then it would be treated as a potentially exempt transfer and if you were to survive for 7 years after making the potentially exempt transfer then the value of your home would come out of your estate for inheritance tax purposes upon condition that you did not live in it after you had made the gift.
If you continue to live in your home after you make the gift to your children then it is treated as a gift with reservation of benefit. This means that you reserve the right to benefit from the home and according to inheritance tax rules the home will then remain part of your estate on your death even if you live beyond 7 years.
One way to get round this would be to give your home to your children and then to pay a market rent to them for living in your home. A market rent is the going rate for similar local rental properties. If you were to pay a market rent then provided you survived for 7 years after giving your home to your children it would be excluded from your estate for inheritance tax purposes upon your death. Your children would be liable to income tax on the rental income.
Once you have signed over your home to your children then it will be counted as belonging to your children and you will no longer be the legal owner. You would not be able to use your home for example to obtain an equity release mortgage if you wanted to remain in your home and pay for live in carers. You would not be able to use the proceeds of sale of your home to pay for your care in the event that you needed to move into a nursing home. If you wanted to move from your home and purchase another home you would only be able to do this with the consent of your children.
If your children own your home capital gains tax will be charged on any sale of the home in the future. Capital gains tax is charged on them because the home is not their residence. Capital gains tax would be charged on the increase in the value of the property from the date of transfer to your children until the date of sale. If it was worth £300,000 when transferred to your children and £450,000 on a subsequent sale then the capital gain would be £150,000 and this gain would be charged to tax.
If you give your home to your children and they subsequently get divorced or are declared bankrupt then your home is one of their assets to be claimed by their spouse or by their trustee in bankruptcy.
You can see from the above that you should always think very carefully about giving your home to your children and you should always take legal advice separately from your children.
