Q&A - My husband died of COVID and my son wants me to sign my home over to him

Q:    When we updated our Wills, they stated that when one of us died the other would inherit their share of the home. Now my husband has died, my son has suggested I sign the house over to him to avoid paying inheritance tax. He does not live with me and says I can still live in the house but would need to stay alive for seven years. As my husband died unexpectedly of COVID-19 aged 58, it has made me nervous. How would signing over the house work?

A:    If you gifted your home to your son but continued living in it rent-free, this would be known as a ‘gift with reservation of benefit’ as your son would not be taking possession or enjoyment of the property. The value of ‘the gift’ would therefore still form part of your estate when you die, irrespective of how long you lived afterwards.

If, however, you gifted your house to your son and continued living there but paid full market rent and contributed a fair share to household bills, then “the gift” would not be treated as a reservation of benefit since your son would be receiving rent which would constitute “possession and enjoyment” by him. Such payments would need to be proven so you would need to keep accurate records. Provided you do so and survive the gift by seven years, its value should not form part of your estate, or be included in IHT calculations when you die, but you would need to continue paying rent until you died.

Should you die within seven years of gifting the house, whilst the house would still  be treated as having been gifted, a proportion of inheritance tax may be payable but would reduce depending on how many years you survive the gift. Gifting property should not be done without careful consideration to potential pitfalls and you should seek advice from a lawyer.

Article December 2020

This question has been answered by Victoria Wilson, a Partner with GHP Legal.  If you would like to speak to someone about this or any other legal matter it is still possible, and we are doing everything we can to ensure that we continue to offer our high levels of service to our clients.  In accordance with government guidelines, some of our lawyers are currently working remotely which means you may not now receive a response as promptly as you may expect. Please kindly bear with us and we will respond as soon as we are able.

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Victoria Wilson

Victoria Wilson

Partner

A Partner and Head of our Probate, Wills, Trusts and Tax team

Lisa Jones

Lisa Jones

Senior Solicitor

Part of our Probate, Wills, Tax and Trusts team in Wrexham