Deciding what to do with the family home can be a significant decision for many homeowners. While some may choose to leave it as part of their estate to be inherited by their children after they pass away, others opt to gift the home to their children during their lifetime. This decision can have various financial, emotional, and practical implications. Here are reasons why you might, or might not, consider gifting the family home here in Cyprus to your children while you're still alive.
Avoiding Probate Fees
Transferring the title deeds of your family home to your children during your lifetime can help bypass the lengthy and sometimes costly probate process. Probate is the legal process of distributing a deceased person's assets, including real estate, which can tie up assets for many months or even years. By gifting the home before you pass away, you can potentially spare your children from this hassle. However, please be aware that if you are subject to UK Inheritance Tax, gifting a home to the children whilst still retaining a benefit (i.e. still living in it) does not remove the asset from your estate.
Asset Protection for Future Life Planning
For those concerned about the high costs of long-term care, gifting the family home to their children can possibly be a strategic move for future UK planning. In many cases, eligibility for Government funded long-term care is subject to strict asset and income limits. By transferring ownership of the home to their children, people may be able to shield the family home from being sold to pay for later life care. However, it's crucial to consult with legal and financial professionals familiar with benefit calculations & conditions to ensure compliance with the rules and regulations in order to avoid claims by UK Councils that the transaction was “deliberate deprivation”.
Ensuring Continued Family Ownership
Where perhaps the home is owned 50:50 between a couple and it is desired that each person’s share be transferred or left to their own children, perhaps from previous relationships, issues can arise after one of them has passed away and there is friction between the surviving partner and the children of the deceased. These issues can include disputes such as the children wishing to occupy the property; disputes over who pays running and or maintenance costs; and what happens if the surviving partner enters into a new relationship.
Financial Assistance for Children
Gifting the title deeds of your family home here in Cyprus to your children can serve as a significant financial boon for them. However, not many people realise that if the children are in the UK, even a share of a property in Cyprus counts as a first or second home and accordingly they will pay extra UK Stamp Duty should they move house themselves.
Bankruptcy & Sideways Disinheritance
Consideration needs to be given to the potential implications affecting the parents if, for example, the child was in financial difficulties/ bankruptcy and the property was seconded or sold. Other issues arise if the child was to enter into divorce proceedings and the property was included in the “divorce pot” or if the child predeceased the parent and the property was bequeathed to their spouse i.e. a son or daughter in law.
Conclusion
Deciding whether to gift the family home to your children during your lifetime requires careful consideration of your financial circumstances, estate planning goals, and family dynamics. Whilst there are undeniable benefits to making such a gift, it's essential to weigh the potential implications and consult with legal, financial, and tax advisors to ensure that the decision aligns with your overall estate planning strategy. Ultimately, you can leave a lasting legacy for your children and provide them with a foundation for a brighter future.
If you require any further information or advice please consult with a qualified Will Writer at Maplebrook Services Ltd today by contacting the office on +357 26600780 or by emailing info@maplebrookservices.com. Please also note that our next Free Life Admin Clinic will be on Wednesday 27th March 2024 from 10.30am – 3pm.