The Hidden Risks of Gifting Your Property
- 6 days ago
- 4 min read
Updated: 24 hours ago
On the surface, gifting your property might seem like a proactive move. But once the transfer is complete, you lose legal ownership and control.
Watch: The Hidden Risks of Gifting Your Property
Before you read further, we recommend watching this short video, where Gary explains why gifting your property can create serious — and often unexpected — problems.
In just a few minutes, he outlines the key risks, including loss of control, tax implications, and how family circumstances can impact your home once it’s no longer legally yours.
If you prefer, you can watch the video now and then continue reading for a more detailed breakdown below.
That opens the door to a number of serious risks.
1. You Could Lose Your Home
Once the property is in your child’s name:
They legally own it — not you
If they decide to sell, you cannot stop them
You could be left without a home
Even in families with the best intentions, circumstances can change.
2. Divorce Could Cost You 50% of Your Property
If your child divorces after receiving your property:
Their partner may be entitled to up to 50% of its value
If your child cannot pay this, the property may need to be sold
This could happen during your lifetime
In other words, your home could be used to settle someone else’s divorce.
3. Your Assets Could Leave the Family
If a beneficiary dies unexpectedly:
Their share of your property may pass to their spouse
If that spouse remarries, your assets could pass to someone outside your family
Your grandchildren could be completely disinherited
This is known as sideways disinheritance — and it’s more common than people realise.
4. Capital Gains Tax Could Become a Problem
Your main residence is usually exempt from Capital Gains Tax (CGT).
But once you gift it:
That exemption is lost if your child does not live in the property
CGT starts accruing from the date of transfer
The eventual tax bill could be significant
This can reduce the value of your estate and create unexpected liabilities.
5. You Lose Flexibility
If your circumstances change:
You may want to move or downsize
You’ll need your child’s permission to sell
CGT may be payable on the sale
This can complicate what should be a straightforward life decision.
The 7-Year Rule: Not as Simple as It Sounds
Many people rely on the so-called “7-year rule” for inheritance tax planning.
This refers to Potentially Exempt Transfers (PETs).
In simple terms:
If you gift an asset
And survive for 7 years
It may fall outside your estate for inheritance tax
But there’s a critical condition:
👉 You must give up all benefit from the asset.
If you continue living in your home after gifting it:
The gift is invalid for tax purposes
It becomes a “gift with reservation of benefit”
It remains part of your estate
Deprivation of Assets: A Major Pitfall
If your goal is to avoid care fees, gifting property can backfire.
Local authorities can assess whether you’ve deliberately reduced your assets to avoid paying for care.
If they decide you have:
The gift may be treated as deprivation of assets
They can still assess you as if you own the property
In some cases, they may even pursue recovery from the recipient
This means the strategy simply doesn’t work — and can create further complications.
Inheritance Tax: You May Not Need to Act
Many couples are surprised to learn:
Married couples can pass on up to £1 million tax-free (subject to thresholds and allowances)
If your estate is below this level:
There may be no inheritance tax to reduce
Gifting property could be unnecessary — and risky
What About Gifting Money Instead?
You can make smaller, tax-efficient gifts:
£3,000 per year (per person)
Unused allowance can be carried forward one year
This means up to £6,000 in the first year
However:
This allowance applies to the giver, not the recipient
Larger gifts are still subject to inheritance tax rules
A Safer, More Effective Alternative
Rather than giving away control, there are structured estate planning solutions that allow you to:
Retain control of your property during your lifetime
Protect against divorce, bankruptcy, and remarriage risks
Prevent sideways disinheritance
Avoid unnecessary Capital Gains Tax issues
Remain compliant with HMRC and HM Land Registry
Reduce inheritance tax where applicable
Avoid deprivation of assets challenges
These solutions are designed to protect your assets without exposing you to unnecessary risk.
The Bottom Line
Transferring your property to your children may sound like a smart move…
But in reality, it can lead to:
Loss of control
Family disputes
Tax complications
Financial loss
And even losing your home
Good estate planning is not about giving assets away — it’s about protecting them properly.
Need Advice on Protecting Your Assets?
Every situation is different.
The right approach depends on your:
Family structure
Asset levels
Long-term goals
If you want to understand how to pass on your assets safely, legally, and efficiently, the next step is a professional review.
Use the button below to arrange a convenient time to speak with our team.
