Gifts and Transfers

INTRODUCTION

It is perfectly in order to transfer land or property to someone else by way of a gift or at a price lower than the normal value. These types of property transactions are often referred to as "Voluntary Dispositions". However there are some matters that need to be considered.

BANKRUPTCY

If an individual makes a gift or transfer of land and later becomes bankrupt, then in certain circumstances within five years from making the gift or transfer, the bankruptcy courts can set aside the voluntary disposition.

INSOLVENCY

If a company makes a gift or transfer of land and within two years becomes insolvent, then the company’s liquidator can apply to the courts to set aside the transaction.

INHERITANCE TAX

Gifts made during a persons lifetime can be used to avoid Inheritance Tax and can be made up to the current nil rate threshold. If the donor dies within seven years of the gift, it attracts Inheritance Tax. The tax payable must either be paid in full or in part, depending on the number of years that have passed since the gift was made. If the donor survives for longer than seven years, the gift is Inheritance Tax free

RESIDENTIAL CARE

If an individual makes a gift or transfer of their assets (including land or property) with a view to depriving themselves of a resource for the purposes of securing or increasing entitlement to Income Support or, reducing the amount that they may be liable to pay to the local authority for accommodation, then they may still be treated as if the asset was still owned by them.

ELDERLY RELATIVES EXAMPLE

So, if an elderly relative transfers their house to say, their children for free or at a price lower than the actual value, just before they were about to go into local authority accommodation, the chances are that it would be treated as deliberate depravation. The local authority could then apply to set the transaction aside.

BURDEN OF PROOF

It is for the Local Authority to prove there was a deliberate intention in making the gift. That can be inferred from the surrounding circumstances. If the individual had made the gift or transfer at a time when they were fit and healthy and could not have foreseen the need to move into residential accommodation, then the Local Authority may have difficulties in proving a deliberate intention.

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