Parents want to donate money to help child get on the property ladder

ReallyPoorMan

I don't know if it falls under the mortgage thread so feel free to move if it's in the wrong section.

An elder friend of mine (he's 61) is planning to help his son get on the property ladder by donating to him a large sum of money to go towards to the house. He himself does not want any ties to the property or the money so it'll be exclusively in the son's name and his fiancee (he's getting married hence the gift). I advised him that if he's not too careful it might be considered as money laundering or something by the banks.

So my questions are, can he just give the money to his son without any ties to it? If there's a legal issue what's the legal way of doing it? I've been told that it is a considerable amount.

gil13

It would be considered a PET from inheritance tax point of view, if the father survives for 7 years then it would be exempt, but should check first but this is what I understand to to be the case.

CLAPTON

Yes a father can give his son money if he wishes ... how can money laundering come into it... unless his father is a crook ?

How considerable is 'considerable'.

As gi13l says there is a potential IHT issue but then if he didn't give it to him then there would still be a potential IHT issue.

ReallyPoorMan

It's less than £250K but enough so the son doesn't have to worry on the mortgage.

I used to work in a bank and if I found out a large chunk of money disappear from a client's bank account I would report it to my supervisor. And if somehow I found out it was used to buy a property under someone else name (i.e. the son) then I would fill out a suspect money laundering form. Which may cause problems, especially if he doesn't want to be linked to it.

So by declaring it as a PET would the father still be legally be linked to the money? During the 7 year period would it still be consider as his asset? If worst case scenario he goes bankrupt during the 7 years can the son lose his home?

dunstonh

I used to work in a bank and if I found out a large chunk of money disappear from a client's bank account I would report it to my supervisor. And if somehow I found out it was used to buy a property under someone else name (i.e. the son) then I would fill out a suspect money laundering form. Which may cause problems, especially if he doesn't want to be linked to it.

Your MLRO would have filtered those out easily enough. There is nothing illegal about gifting. You are right to report suspicions but you were a little inexperienced for the reasoning. Many banks take the approach better to be safe than sorry. Plus, they don't mind too much as the FSA review the number of reports and its another entry on the bank/branch league tables centrally.

As others have said, he just needs to declare the gift so it correctly gets recorded. he should also make provision to pay the IHT if he was to die in the 7 year period just in case (he may already have that taken car of).

I am going to assume IHT is an issue as a £250k gift is rather large.