Transfer of property in Client's lifetime

Good morning

Could I just check my understanding of this position is correct

My client was advised to transfer a majority share of her home to her two daughters.

The split is 10% my client and 45% for each of the two daughters.

Property has since gone up in value a lot and as a result of this advice the daughters now face a CGT bill once the property is sold.

Younger daughter has in the past claimed means tested benefits and she would like to do so again. When asked the question do you own a second property - she answered no as she was advised that owning a share of her mum’s house would not affect her benefits - surely this is wrong advice as a ownership of a second home is treated as savings? Is this right.

Presumably to receive means tested benefits going forward she would need to dispose of her share - back to mum - but this will result in a £13k CGT bill which she can’t afford.

Any way around this please?

Many thanks
Deborah

Hello,

You’re correct. The question asks - do you have any other property assets. Which the client ought to declare.

As for a solution (subject to NRB / property value ie under 325k). D could transfer the 10% into a RPT this would create a CLT and therfore CGT hold over relief maybe available.

This would a) take the propery out of scope for means testing b) defer the CGT issue.

Wed assume deprivation of assets rules ought to be considered.

Richard C. Bishop
PFEP

Yes indeed the deprivation rules need to be looked at.

I think this makes it clear that the rules would apply in Deborah’s case:- Under the ‘deprivation of capital rule’, a claimant who deprives him or herself of capital for the purpose of retaining or obtaining entitlement to means-tested benefits (i.e. Income Support, Housing and Council Benefit, income-based Jobseeker’s Allowance, income-based Employment and Support Allowance and State Pension Credit) will be treated as depriving themselves of capital. Under the regulations the claimant will then be treated as still possessing the value of the actual capital given away as “notional capital” for benefit purposes, (subject to its value diminishing over time by means of a calculation under the ‘diminishing notional capital rule’). See for example Housing Benefit Regulations 2006 (SI 2006/213) reg 49 (similar provisions apply to each of the means-tested benefits listed above).

Patrick Moroney

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Am I reading that right? It says a discretionary trust is not included?

(2) Except in the case of—

(a) a discretionary trust; or

Richard C. Bishop
PFEP

I presume it is based on the fact that a beneficiary of a discretionary trust has no right to benefit and could only benefit at the trustees discretion so that if he were to decline receipt of a payment, which would be to the benefit of others in the class of beneficiaries, this would not be deprivation on his part. Maybe someone else on the forum might have a better explanation.

Patrick Moroney

We dont know which benefit is applicable here - its not my understanding that assets placed into a RPT and/or pensions would automatically be deemded deprivation.

Richard C. Bishop
PFEP