Property Consultant Richard Phillips writes this useful guide outlining he considerations when gifting a property.

I am called upon to deal with the gifting of property (be it houses or land) on behalf of clients. In the case of farmland and woodland this is increasingly happening with a view to dealing with the impending inheritance tax changes for farmers and business owners.

I will not specifically comment on those because that is a very detailed subject, and it would certainly need you to obtain accountants advice before undertaking that gift and you would also need to possibly deal with partnership or company law matters as well. 

I would make the following basic points however:

1. You are gifting a property. If you give a property, it no longer belongs to you. This may be a statement of the blindingly obvious, but I have over many years seen sad cases where parents for instance have gifted properties to their children on the promise perhaps that they might pay their parents back if the property were sold only to find that as there is nothing in writing the children will sell the property and keep the money. 

If you are gifting a property, you are therefore giving it away forever.

• There are tax implications if you gift a property. A gift of a property is a disposal for capital gains tax purposes. Capital Gains Tax is a slight misnomer as it implies that you only have to pay tax on a capital gain being made.

This is not the case. It will apply if you make a disposal of a property even by gift. 

You must notify the tax authorities of any gift made within 60 days of the completion of the gift. 

You will need to take accountant’s advice to see if a capital gains tax liability might arise and this would depend on whether you have made other gifts in the tax year.

• A gift of property also has implications for your future residential care when you become elderly. 

A disposal of a property by gift may still result in you having to pay nursing or residential home fees. Indeed, the local authority if you make such a disposal can deem you to continue to have the asset (even though you have gifted it away) and when assessing your financial situation and any entitlement to nursing or residential home fees.

• There are also implications as regards potential beneficiaries in that if you are making such a gift you should also consider reviewing your Will so that if for instance you give one of your children a property then it may be inappropriate to have a provision in the Will which shares the estate that you would possess when you die in equal shares, say between two children where one has already had a gift made to them.

• There are also possible problems in the event, or unlikely event of your bankruptcy, in that if a gift has been made within six years of bankruptcy, then the trustee in bankruptcy can look to set aside the transaction on the basis that it was attempting to dispose of assets which otherwise which might be available to the creditors. 

Normally it would be appropriate also if you were making a gift to either prepare a statutory declaration of solvency which would set out your debts and assets at the time of the gift (which might prevent the trustee in bankruptcy being able to claim that the gift was made to avoid paying the creditors) or alternatively as set out below you may need to take out specialist indemnity insurance to cover against this eventuality.

You would need accountant’s and solicitor’s advice in preparing such a statement or statutory declaration.

The fact there has been a deed of gift will be apparent from inspection of the title documents by any purchaser’s solicitors and any purchaser’s solicitors in the future if they are buying the property say from the donee (ie the person you gave the property to) within six years of the transaction will either need to see a statutory declaration as to solvency or the existence of an indemnity policy which can be obtained. Those indemnity policies which take the form of a one premium payment policy would cost several hundred pounds and the premium will be calculated by reference to the property value.

In essence therefore a gift of a property is a serious matter which should not be undertaken lightly and certainly would need professional advice.

Wollens can provide that advice in terms of Wills and financial planning and also as regards the conveyancing necessary to carry out that work.

Please contact either our Conveyancing Department or our Private Client if you are considering a gift of a property so that initial advice can be given.

You can also complete an online enquiry form. One of the Wollens team will contact you as soon as they are available.