Why not give your home to your Children?
Why It’s Dangerous to Give Your Home to Your Children and Continue Living in It
It’s a question I hear quite often:
“Can’t I just give my house to the kids now, so they don’t have to pay Inheritance Tax later?”
On the surface, it sounds simple — but in practice, giving your home away while continuing to live in it can be one of the most costly and risky decisions you’ll ever make. Here’s why.
1. You Don’t Really Give It Away — Not in HMRC’s Eyes
If you give your home to your children but carry on living there rent-free, HMRC still treats it as part of your estate for Inheritance Tax purposes.
This is called a “Gift with Reservation of Benefit” — meaning you’ve given it away, but you’re still benefiting from it.
So, if you die still living there without paying full market rent, the house’s value will be added back into your estate for IHT. You’ve gained no tax advantage — and potentially created new problems (see below).
2. You Lose Control
Once the property is legally in your children’s names, it’s no longer yours. You have no automatic right to stay there.
If your child:
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Divorces,
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Gets into debt,
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Falls out with a sibling or partner, or
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Simply decides to sell —
you could find yourself homeless or forced to move. Even the most loving families can face unexpected pressure when other people’s interests or financial difficulties are involved.
3. You Could Create a Capital Gains Tax Problem for Them
Your home is exempt from Capital Gains Tax (CGT) while you live in it as your main residence. But once your children own it, they don’t live there — so if it’s ever sold, they could face CGT on the increase in value from the date of transfer.
That can be a hefty and completely avoidable tax bill.
4. It May Not Protect Against Care Fees
Many people hope that giving their house away will prevent the local authority from including it in their financial assessment if they need care later.
Unfortunately, councils are wise to this. If they believe you’ve transferred your home deliberately to avoid care fees, they can treat it as “deprivation of assets” — and still include it as if you owned it. All they have to do is check the Land Registry and then refuse to pay anything, saddling your family with an expensive problem
You might end up worse off, because you’ve lost ownership but gained no protection.
5. It Can Complicate Inheritance and Cause Family Strain
Imagine you give your home to one child (perhaps the eldest, “to keep things simple”) with the understanding that they’ll “sort things out fairly later.”
If relationships change or other family members dispute your intentions, that verbal understanding may count for nothing. Wills, intestacy rules, and family disputes can all become tangled and distressing.
6. There Are Safer and More Flexible Alternatives
If your goal is to protect your home or reduce future tax, there are much better ways to achieve it.
For example:
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A properly structured Will Trust can protect your home for your family after the first death, while allowing the survivor to continue living there.
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A Life Interest Trust can ring-fence part of the property against remarriage or care fees.
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Sensible use of gifts and allowances over time can reduce Inheritance Tax without losing control of your home.
The right approach depends on your personal situation — and a brief chat with an experienced estate planner can help you find the safest route.
In Summary
Gifting your home outright to your children while you still live there can be a financial and emotional minefield. You risk losing control, gaining no tax benefit, and potentially causing major family or tax complications.
There are far safer, legal, and flexible ways to achieve your aims — whether that’s protecting your home, avoiding unnecessary tax, or ensuring fairness among your family.
If you’d like a free, no-obligation discussion about the best way to protect your home and family, get in touch:
Stephen Pett CmpnSWW, AffSTEP, DMS
The Professional Will Writer
📞 01323 766766 📧 st***@**************************co.uk
If you have already done this, you may wish to contact us urgently – it may not be too late to undo it without a Tax Bill.This video is a little out of date, but still of general interest.Previous article. Next article. Planning Index Page.