As the virtual steam of the Necropolis Railway faded and the book club turned to their second favourite activity, eating cake, the group got chatting. Mary had made an excellent Victoria sponge this week. Pam said "it's just as well it wasn't my turn to bake, I have been going back and forth to mum's all week. She has been speaking to a friend about care fees. I told her all that we had talked about but her friend is adamant that none of this gifting stuff is relevant to her. She is not going to gift her house, she is going to sell it to her son for £1. That got mum thinking whether she should do the same. I had to take a few deep breaths".
"What do you mean?" asked Marjorie, "if she sells it, that's not a gift is it?" "Actually" said Mary, "it's funny you should mention that. My mum thought of doing exactly the same thing with me and she went to a firm to ask them to draw the paperwork up. Thankfully, somebody with some expert knowledge pointed out to her that she might be selling the house for £1 but then the rest of the value of the house would be a gift". "Really" said Marjorie. "Yes" said Mary, "if you sell a £250,000 house for £1, you have actually made a gift of £249,999". "Wow, I would never have thought of that" said Marjorie "so it wouldn't have made any difference if the amount of money was £10 or £50?" "No" said Mary, "it wouldn't". "Wow, it's a minefield" said Marjorie.
Comment
There are quite a few urban myths out there. One of them, as the group found, is that selling your house for a really low value avoids all of the gifting issues – it doesn't.
Other urban myths are that if you give an asset away, it doesn't count for care fees after seven years (there is no seven year limit on care fees, it is only on Inheritance Tax), or that once you have left a property to somebody in your Will it can't be taken into account for anything. That isn't true either.
As with all important decisions about gifting (or selling something for £1, £10 or £50) it is really important to take expert legal advice to protect your position and your loved ones.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
