Should you give your house to your children now?

Last verified: 13 January 2026 (England & Wales)

Also marketed under several names, including “living trusts”, “lifetime trusts”, “family trusts” and “home protection plans”.

Related: home-protection-trusts-caution?

In most cases, the answer is no. Of course, it depends on your reasons and your individual circumstances. However, at Fern Wills & LPAs we do not recommend or sell lifetime home trusts for everyday family situations because, in our experience, the legal and tax risks usually outweigh the claimed advantages.

You will often hear that this is the best thing to do to avoid “basically everything”, from probate to care fees. The sales narrative is usually much simpler than the reality.

If your main aim is to keep control, protect the survivor, and still leave the home to the children, the starting point is usually a well drafted Will (and sometimes a Will trust), not a lifetime transfer of the home.

Why people think it helps

Clients often tell us that either:

• a Facebook advert with bold claims, or
• “someone I know” who had one,

said it is the best thing to do to avoid probate, inheritance tax, care fees, and family disputes.

A quick reality check I often use is:

Q) Were they assessed for care home costs? A) No.

Q) Did they pay full market rent? A) No.

Q) Did they live elsewhere? A) No.

If nothing was ever tested, they may simply have been lucky. In many cases, the worst outcome is not that the trust “worked”. It is that the family never discovered the costs and complications it created.

What “living trust” usually means in this context

Inter-vivos means “between the living”, meaning you transfer the home to a trust while you are alive, rather than dealing with it through your Will.

Two main trust types are commonly discussed:

Revocable trusts

These can be cancelled or amended during the lifetime of the person creating the trust. However, they usually remain part of that person’s estate for inheritance tax purposes. In everyday home planning, that is rarely an advantage.

Irrevocable trusts

These cannot usually be changed without agreement and sometimes a court order. This typically involves a real loss of control. They are often sold as the “serious” option, but the loss of control is exactly what creates many of the practical risks.

This is not an anti-trust article

Trusts can be excellent tools when they are used in the right place, for the right reasons, and properly explained. The concern here is lifetime home trusts sold as a one-size-fits-all solution, often with oversimplified claims and without the client fully understanding the real-world implications.

Trusts are not the problem. Mismatched lifetime home trusts, oversold as a cure-all, are the problem.

Advantages that are sometimes claimed

In the right niche circumstances, certain trust structures can have legitimate benefits. For example:

• This type of trust can help already-wealthy beneficiaries save some inheritance tax in specific planning scenarios.
• As a discretionary trust, it can offer some protection where a beneficiary is vulnerable.
• There may be some protection against scams and cons.

However, testamentary trusts (Will trusts) can often achieve the practical outcome most families want at a fraction of the fee, and without giving away control of the home during lifetime.

Disadvantages and risks (the part most adverts skip)

A lifetime transfer of the home can create real risks, including:

• If an adult child divorces, their share of your home can be pulled into the financial settlement.
• If an adult child becomes bankrupt, your home may have to be sold to pay their debts.
• If a child needs residential care, their share can be assessed for care costs.
• If you fall out, you can end up with a practical or legal fight about your right to stay.
• You may later have insufficient assets and flexibility to make sensible gifts in your Will.
• If you later need care and the local authority believes the motivation was to avoid paying, they can challenge it.
• The cost of the trust can outweigh any probate costs it was meant to “save”.

What to do instead, in most families

In most everyday cases, the safer alternative is to keep the home in your name during your lifetime and deal with protection through a properly drafted Will.

Where appropriate, that can include a Will trust, such as a Property Life Interest Trust (PLIT) or a Flexible Life Interest Trust (FLIT), to protect the survivor and still keep a clear route for the children later.

For most families, a PLIT or FLIT can deliver the practical protections people want, without giving away the home now.

What really happens with tax (short version)

If you give the home (or part of it) to your children while you continue living there, common consequences include:

• It can become a second home for your children, creating potential capital gains tax exposure on a later sale (depending on their own residence position).
• If they buy another property, they may pay higher-rate Stamp Duty Land Tax because they already own a share in your home (the rules are nuanced and fact-specific).
• Transfers into many discretionary trust structures can trigger immediate inheritance tax entry charges where nil-rate band capacity is exceeded, with ongoing trust charges in some cases.
• If you continue to live in the home as before, it can still remain in your estate for inheritance tax purposes (depending on how the arrangement is structured).
• Avoiding “gift with reservation” issues often requires a full market-rent arrangement and ongoing evidence, which many families do not maintain in real life.
• Even where gift-with-reservation is avoided, the Pre-Owned Assets Tax (POAT) can still apply in some situations.

Please think carefully before taking this step. There are often better ways of protecting your home.

Please think carefully before taking this step. There are often better ways of protecting your home.

The first question I always ask is: what are you trying to achieve overall?

Being financially secure is an essential part of ageing well. It is rarely sensible to create a complex situation that causes problems during your lifetime or after your death, when a different decision would have achieved the real goal more safely.

Brief technical note (optional)

Technical note: Lifetime trust tax points (England & Wales)

Optional reference for advisers and professionals:

• Entry: Transfers into discretionary or relevant-property trusts above available nil-rate band are taxed at 20 percent (25 percent if the settlor pays). Aggregation applies over the previous seven years.

• Periodic: At each 10-year anniversary, up to 6 percent on the value above the trust’s available nil-rate band.

• Exit: Proportionate charge when capital leaves. Maximum 6 percent, time-apportioned since the last 10-year point.

• Reporting: Trustees may need to file SA900 and relevant IHT100 returns for exit or 10-year events.

• RNRB: The residence nil-rate band applies only to assets passing on death, not to lifetime gifts or transfers into trust.

Four issues to understand before you do anything

1. Gift with reservation of benefit (GWR).
2. The legal implications of giving away all or part of an asset during your lifetime.
3. Deprivation of assets for care fees and assessments.
4. The immediate and ongoing costs. A living trust can often cost four or five times more than a Will trust.

What is a gift with reservation of benefit?

It is often said that if you survive seven years after a gift is made, the gift is outside your estate for inheritance tax. That can be true for genuine outright gifts.

But if the gift is not truly “outright”, meaning you continue to benefit from the asset, then the asset can still be treated as part of your estate for inheritance tax purposes. The legal title may have changed, but the benefit has not.

Even where GWR is avoided by paying full market rent, the Pre-Owned Assets Tax (POAT) can still apply. It charges income tax based on the property’s annual rental value unless an exemption or election applies.

Paying market rent, and why it rarely works in real life

To remove a home from your estate, you usually must give up all benefits. Continuing to live there without a proper market-rent arrangement under a legal tenancy can keep it within your estate.

In practice, families struggle with:

• sustaining full market rent over many years,
• documenting it properly,
• and accepting the tax consequences for the recipient.

If you die within a few years, the “benefit” can be illusory, but the costs were very real.

What are the legal implications?

If you gift all of your home to someone else, you need protection to ensure the house cannot simply be sold out from under you, leaving you homeless.

Circumstances change:

• financial difficulty and bankruptcy,
• marriage and divorce,
• family disagreements,
• death of the recipient.

Even if you gift only part of your home, you are no longer the sole owner. You cannot make decisions without the other party’s agreement, which can be restrictive and stressful.

What is deprivation of assets?

Apart from tax and legal consequences, gifting assets while you are alive can be treated by the local authority as deprivation of assets for care fees. This means giving away assets with a significant motive of avoiding the need to fund your own care.

There is no fixed time limit on these investigations. A local authority can look back indefinitely if it suspects deliberate deprivation. If it decides you deliberately gave assets away to avoid care fees, it can treat you as still owning them and seek recovery from the people who received them.

Deprivation of assets is laid out in the Care Act 2014

Scenario: Mrs Jones (why this gets complicated fast)

Mrs Jones is a 70-year-old widow living in a property valued at £900,000. Her daughter Charlotte lives with her. Her son lives with his wife and young family. Mrs Jones’s estate is around £1.5m (including pension). She wants to minimise inheritance tax when she dies.

She is considering gifting 50 percent of the home to her daughter. She has read that if she survives seven years, that 50 percent might be outside her estate for inheritance tax. She plans to leave the other 50 percent to her son in her Will, with the rest of her estate split equally.

Because her daughter lives with her, the situation is more complex. Here is what to consider.

Ownership

The property would need to be owned as tenants in common (50–50) if she wants her share to pass under her Will. This differs from beneficial joint tenants, where the survivor automatically inherits the whole property under survivorship rules, regardless of what the Will says.

Inheritance tax thresholds

As her share passes to her son on death, the residence nil-rate band can apply if the conditions are met. Note: RNRB does not apply to lifetime gifts or transfers into trust.

Capital gains tax (CGT)

There is typically no CGT on the transfer to the daughter if private residence relief applies. However, if the son’s main residence is elsewhere, he may have CGT exposure on sale for his share above the probate value.

Gift with reservation of benefit

To reduce risk, they would need to show a genuine sharing of occupation costs and responsibilities. Many families do not maintain this properly over time.

Daughter’s plans

If the daughter moves out, Mrs Jones may need to pay market rent for the daughter’s share. The property cannot be sold without the daughter’s written agreement. If the daughter buys another property, higher-rate SDLT may apply because she already owns a share in Mrs Jones’s home. First-time buyer reliefs and mortgage terms can also be affected. If the daughter marries, the spouse can indirectly influence outcomes, particularly in a divorce.

Care costs

Even if deprivation is not found, Mrs Jones’s share of the home could still be included in a means test later if other funds run out. Care costs can be significant and can escalate faster than many people expect.

Legal advice

This is the point where proper legal advice is essential. A deed of gift, occupation rights, and protection clauses are not “admin”. They are the difference between safety and serious regret.

Cases

A parent reacting to fear-based marketing

They saw a “protect your home” advert and felt they must act quickly. After a calmer review, it became clear their main aim was simply: “I want to stay in my home and I want it to go to my children.” A clear Will plan achieved that aim without lifetime transfer risk.

A family where one child later divorces

A small share of the home transferred years earlier becomes relevant in financial proceedings. The parent assumed “it’s still my home.” Legally, it was not. The family wished they had used a Will trust instead.

A couple who need flexibility to move or downsize

Health changes meant they needed to move within five years. The lifetime structure complicated sale, created delays, and triggered professional costs they did not expect.

A child with financial difficulties

An adult child’s bankruptcy risk turned a “simple transfer” into a serious threat to the family home. The parent realised too late that control had already been given away.

A client who actually needed joined-up advice

The client assumed it was only a Will question. In reality, the best outcome required joined-up advice across property ownership, tax rules, and a Will plan that supported the real objective.

Final thoughts and next steps

A living trust for the home may seem reassuring, but for most families it introduces unnecessary cost, complexity, and ongoing tax and legal exposure with little practical benefit. In many situations, a well drafted Will (and where appropriate a Will trust) achieves the same real-world protection for a fraction of the cost, without the risk of losing ownership during lifetime.

If you want to protect your home and pass it on efficiently, start with professional advice about Will planning and Will trusts that suit your circumstances.

See also: home-protection-trusts-caution