When Gifting Isn’t the Best Option
By now, you’ve seen that gifting property can trigger Capital Gains Tax, Inheritance Tax, or even the Gift With Reservation rules if you keep using it.
So what if gifting isn’t right for your family?
There are other ways to protect property, pass on value, and reduce tax — without giving everything away too soon.
Let’s explore three main alternatives: Trusts, joint ownership, and life insurance.
If you’ve followed my last post on Gift With Reservation, you’ll know that gifting property isn’t always straightforward.
👉 Read it here: Gift With Reservation – Why Living in a Gifted Property Can Backfire
🎥 Watch: Alternatives to Gifting Property – Trusts, Joint Ownership & Insurance (UK 2025/26)
If you prefer to watch instead, here’s my video where I explain three practical alternatives to gifting — how trusts work, when joint ownership makes sense, and how insurance can protect your family from future Inheritance Tax.
1. Using Trusts to Hold Property
Trusts allow you to pass property or income to family while keeping some control.
They’re often used where parents want to help children but not give property outright.
Common options include:
- Bare Trusts: Simple, often used for minors — but assets belong to the child absolutely at 18.
- Interest in possession Trusts: The beneficiary can use or receive income from the property, while another person inherits later.
- Discretionary Trusts: Trustees decide who benefits and when — flexible for families with changing circumstances.
Why Consider a Trust
- Keeps control within the family.
- Can help with IHT planning if set up early.
- Allows for structured inheritance — useful where children are young, vulnerable, or not financially stable.
Important Note
Trusts must be legally drafted by a Solicitor or Chartered Legal Executive.
Your Accountant’s role is to advise on the tax implications and register the Trust with HMRC once it’s in place.
For a detailed guide, see my blog: Using Trusts to Manage Property Tax
Watch Out
- Trusts are not tax-free. They can attract CGT, IHT, and income-tax charges depending on how they’re structured.
- Professional legal and tax input is essential at the start.
2. Joint Ownership – Sharing Without Gifting Everything
Instead of gifting the full property, you can transfer part ownership — usually as tenants in common.
This allows you to:
- Share income or profits with family.
- Pass down part of the property through your Will.
- Keep partial control while starting succession planning.
Example:
You could transfer 25 % of your rental property to your adult child, helping them benefit from future growth while you retain 75 %.
Benefits
- Gradual wealth transfer.
- Easier to control and reverse if needed.
- Useful for tax-band planning across family members.
Risks
- Still triggers CGT on the transferred share.
- May affect SDLT if the property is mortgaged.
- Future sales or disagreements can complicate things.
3. Life Insurance – Cover the Future Tax Bill
If you can’t or don’t want to restructure ownership, a practical option is life insurance.
You can take out a policy written in Trust to cover potential Inheritance Tax.
This means:
- The payout goes directly to your beneficiaries, tax-free.
- They can use it to pay IHT instead of selling the property.
- You keep full control and ownership during your lifetime.
It doesn’t reduce the tax, but it prevents your family being forced to sell assets to pay it.
Example Scenario
David owns a £700,000 home and a £400,000 rental.
He wants to help his children but keep control for now.
His Accountant works alongside a Legal Executive to create a Discretionary Trust for the rental property — ensuring both the legal documents and HMRC registration are handled correctly.
They also set up:
- Joint ownership of the home at 25 % each child, and
- A Life-insurance policy in Trust to cover IHT.
Together, these achieve his goal without gifting everything outright.
Key Takeaways
- Gifting isn’t always the most tax-efficient route.
- Trusts offer control but must be legally drafted and correctly registered.
- Joint ownership allows gradual wealth transfer with flexibility.
- Life insurance can provide peace of mind by covering future IHT.
- A tailored plan combining these options usually works best.
Final Word
There’s no one-size-fits-all approach to passing property to your family.
The right structure depends on your goals, age, income, and the properties you hold.
End-of-Series Wrap-Up
This post wraps up my Gifting Property series — covering the key tax rules, traps, and planning options for families.
You can read the full series from the start here: Gifting Property to Your Children – Full Guide (UK 2025/26)- Series Recap Blog available on 24 October
📞 Book a Property Tax Review to explore your options — and find the balance between generosity, control, and tax efficiency.