I WANT TO KNOW ABOUT GIFTS AND TRANSFERS OF PROPERTY
BANKRUPTCY It is perfectly in order to giveÂ gifts and transfers of propertyÂ to someone else at a price lower than the normal value. Gifts and transfers of propertyÂ are often referred to as “Voluntary Dispositions”. However there are someÂ implicationsÂ and risks that are of relevance regarding gifts and transfers of property. These include:
– Inheritance Tax
– Residential Care
These are set out in more detail below.
WHAT HAPPENS IF I GO BANKRUPT? If an individual makes a gifts and transfers of propertyÂ and later becomes bankrupt, then in certain circumstances within five years from making the gifts and transfers of property, the bankruptcy courts can set aside the voluntary disposition.
WHAT HAPPENS IF A COMPANY BECOMES INSOLVENT If a company makes gifts and transfers of propertyÂ and within two years becomes insolvent, then the companyâs liquidator can apply to the courts to set aside the transaction.
CAN I AVOID PAYING INHERITANCE TAX IF I MAKE GIFT AND TRANSFERS OF PROPERTY IN MY LIFETIME? Gifts and transfers of propertyÂ made during a personâs 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 gifts and transfers of property, 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 gifts and transfers of propertyÂ was made. If the donor survives for longer than seven years, the gift is Inheritance Tax free.
CAN I AVOID PAYING RESIDENTIAL CARE FEES IF I MAKE GIFT AND TRANSFERS OF PROPERTY BEFORE I GO INTO CARE? If an individual makes a gifts and transfers of propertyÂ 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.
CAN YOU GIVE ME AN EXAMPLE RELATING TO RESIDENTIAL CARE FEES? 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.
WHAT LEGAL RIGHTS DOES THE LOCAL AUTHORITY HAVE? It is for the Local Authority to prove there was a deliberate intention in making the gifts and transfers of property. That can be inferred from the surrounding circumstances of the gifts and transfers of property. If the individual had made the gifts and transfers of propertyÂ 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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