It is a common notion to transfer your house into the children's names during your lifetime to save on inheritance tax (IHT) and shield it from care home fees, or simply to keep things tidy when you die. A recent High Court decision, however, serves as a stark warning as to how badly such arrangements can turn out, especially where the paperwork does not match the intention and the family does not get on.

Whose house is it, really?

Putting a property into someone else's name does not necessarily make it theirs. If you carry on living in it, paying the mortgage and treating it as your own, then the law may well regard you as remaining the true, or "beneficial" owner, with the children merely holding legal title on trust for you. In actual fact, when a parent puts a house in a child's name but continues to act as the true owner (paying mortgages, collecting rent, living there), English law presumes the child is merely a "nominee" holding it on a resulting trust for the parent, and the house remains fully within the parent’s estate.

This has consequences people rarely intend. The asset usually remains part of your estate, so the hoped-for savings on tax or care home fees may not work out. Worse, you have created genuine uncertainty about who owns what, which is fertile ground for dispute once you are no longer around to explain your true intentions.

In this case, a man had transferred two properties into his children's names but was found still to be the real owner, with the children holding them on trust for his estate and, because he died without leaving a will, the houses did not go directly to his widow. Under UK intestacy law, the widow only received the first £322,000 (plus personal effects), while the remainder of the estate had to be split 50/50 between the widow and the deceased's five children, triggering vexatious litigation over the values of the homes.

The sons brought large claims, around £500,000, against the estate for mortgage payments and repairs they said they had funded, which, if successful, would have left the estate insolvent. However, the Court dismissed them as an earlier finding that the father himself had paid the mortgages was binding and could not be reopened. Invoices produced for repair work were falsified, and the company named had only been incorporated after the invoices were supposedly issued. The Judge concluded that the sons were motivated, in large part, by a desire to punish their stepmother, and had thus inflated their claims. Due to the family conflict, the High Court appointed an independent professional solicitor to serve as the substitute administrator of the estate to ensure impartial handling, and the properties were forced back into the estate's legal name.

Implications:

Several points stand out for anyone tempted by this kind of arrangement.

• First, transferring assets into the names of others rarely delivers the clean result people pursue. If you retain the benefit of the asset, then you probably retain its ownership in the eyes of the law. As a consequence, the intended tax or care fee advantages can fail as the complications multiply.
• Second, an asset held in a child's name is exposed to that child's own life. If they divorce, become bankrupt or die, the property you thought you had safely parked can be dragged into their affairs, and you have given up control of it in the meantime.
• Third, informal, undocumented arrangements create a breeding ground for arguments about who really owns what, especially in blended families, where a surviving spouse and children from an earlier relationship may have very different interests. Dying without a will only makes it worse, leaving no clear plan and no chosen executor.
• Finally, this case also serves as a reminder that those who administer an estate must keep proper records and behave properly, as the Court will likely lean heavily on contemporaneous documents, treat fabricated claims severely, and will not permit anyone to recover any costs their own misconduct had effectively caused.

The remedy is unglamorous, though effective. Take proper advice before moving assets around, record the true intention in writing, make a will, and think very carefully before putting your home into someone else's name. The instinct to simplify things for the sake of the family can have precisely the opposite outcome – a little professional planning now is far cheaper, and far kinder, than years of litigation later.

Disclaimer: This simplified summary of a UK legal case is for general information only. It is not legal advice, may omit important detail, and may not reflect later developments or appeals. Please read the full judgement and seek professional legal advice before acting.