My son having to sign a deed of postponement

Black_Monk

Dear All

My wife and I are buying a second home. We have paid off the mortgage on our first house and do not have have any loans with the house as security. Yesterday we recieved a letter from the solicitor stating that because our 17 year old son will be an occuppier of the new house he will need to sign a deed of postponement.

Can anybody please explain what this means? I have Googled 'deed of postponement' but the results suggest it is only used where there is more than one loan against a property to determin which lender has priotity in case of a default.

Thanking you in advance

Lance

Perhaps they got the wrong term. Anyway, I just purchased a house and my adult son resides, I think at 17 yours is classed as adult. If your son is not on the deeds / mortgage the bank want a legal assurence that if they need to repossess your house your son will not be claiming any rights of ownership.

Black_Monk

Dear Lance

Thank you for your reply.

I suspect that is the case. My wife and I did consider adding him (and his older brother who is at university) to the deeds as a way of avoiding IHT. We were concerned however that if they later ran up large debts then the house could be seized by creditors.

Is there a way around this?

dirtygirty

Some people will not like this, but since this is a money saving site...

Thinking of only buying one extra house? Some people find opening a company and putting a house under that is a better way and more tax efficient way to go and less personal risk.

+++

Also I know I will get haters for this, but in the spirit of Vodaphone using tax loop holes..., thought about starting a charity. Yes, there are already are charities out there worse the one I'm suggesting (please do not shoot me - I'm the messenger, or bringer of ideas).

University are now £9000 a year, and a very large proportion of the students (95% from one masters course here in London) came from overseas, as this brings in overseas moneys, so subsidize them via your charity! You get a years income for about 10 months rent too.

The minuses: The property belongs to the charity, not to you. Extra accountancy and paper work.

The positives: You can name and select directors an pay them a salary. Top charity directors get $2.6 million, and even in the uk payments to directors of around £277000 have been know to be made.

If your child gets divorced then the property and probably the directorship can be revoked, so spouse can't walk away with the wealth.

No inheritance tax.

No council knocking on your door when you get older to claim your properties.

No charities are 100% efficient, the US average is that 9 out of 10 charities spend 65% on the actual charitable cause and the best being 86.6% for the cause, this excludes advertising, banquets etc, so do not be fooled with what many claim to be 100%.

Now the BIG tax benefit: the government gives the charity 20% as giftaid. The high rate donator: claims the difference between high rate and basic rate tax. Yes, you get 20% towards the costs of your property-bargain!

mainstreet.com/article/smart-spending/15-highet-paid-charity-ceos?page=16
mainstreet.com/article/moneyinvesting/news/20-worst-charities-america?page=5
guardian.co.uk/culture/charlottehigginsblog/2008/jul/24/whatdoyouthinkofpeterhew
guardian.co.uk/sport/2011/apr/15/london-marathon-director-dave-bedford
voices.yahoo.com/top-charities-trust-2667854.html?cat=17
hmrc.gov.uk/charities/gift_aid/basics.htm

G_M

If you put your son on the deeds and make him a joint owner, this has many obvious implications. The first of these is that he will also have to a party to the mortgage, so will need to be accepted by the lender.

Yorkie1

Also I know I will get haters for this, but in the spirit of Vodaphone using tax loop holes..., thought about starting a charity. Yes, there are already are charities out there worse the one I'm suggesting (please do not shoot me - I'm the messenger, or bringer of ideas).

I cannot for the life of me see how this would satisfy the requirements of the Charity Commission for public benefit. It's a non-starter of an idea in my view.

dirtygirty

Sorry, did make an error

Yes, you get 20% towards the costs of your property-bargain!

Should read "Yes, you get 20%+ towards the costs" because the charity gets 20% and you also pay 20% tax rather than the 50% high rate, so gain 20-30% tax back on the higher amount.

Yorkie1 wrote: »

I cannot for the life of me see how this would satisfy the requirements of the Charity Commission for public benefit. It's a non-starter of an idea in my view.

Well it is currently already being done by at least 1236 charities. I do not think they have stopped it either.
insidehousing.co.uk/associations-face-losing-charity-status/6514019.article

charity-commission.gov.uk/RSS/Updates/affordable_rents_response.aspx

One does not have to spend too much time on the Charity Commission's site looking at names alone, till you spot a strange charity.

BlackMonk

Dear dirtygirty and G_M

Many thanks for your postings.

G_M is correct: Our solicitor seems to think my son can be added to the deeds and not the mortgage but since the point of this legal instrument is to allow the lender to repossess the property then such an action would almost certainly make the mortgager reconsider the loan.

dirtygirty, you are right when you say many directors of charities are well paid. I once worked for an engineering professional body and the accounts revealed a director was paid in excess of £220K. I felt this was an inappropriate level of renumeration for a learnered society with charitable status.

My concern is not tax avoidance it is if my wife and I should die I still want a roof over my son's head. Our insurance would cover the mortgage. I just don't want the lender to evict my son as a knee-jerk reaction.

Yorkie1

I am not disputing that there are charities which are involved with housing. I am indirectly involved with one myself.

The point is that the OP is merely thinking of buying a second property. Trying to conceal a standard property purchase behind the cloak of a new charity is a non-starter in my view. The OP would have to set up a new charity and run the properties in accordance with the charitable purposes of that charity, which include public benefit.

The CC won't allow someone just to set up a charity in order to pay themselves a big salary and rent out properties without satisfying the requirements of the Charities Act - which have been significantly tightened in recent years.

KittyLady

It's fairly standard, when my partner bought our home I had to sign a deed for the same purpose. The house etc are left to me in his will with life insurance to cover the mortgage in case of his death, so I had no problems signing. It does however mean if for example I kicked him out in a marital, then he didn't pay the mortgage, I would have no rights to stay when the mortgage company wanted to repossess the house.

dirtygirty

BlackMonk wrote: »

G_M is correct: Our solicitor seems to think my son can be added to the deeds and not the mortgage but since the point of this legal instrument is to allow the lender to repossess the property then such an action would almost certainly make the mortgager reconsider the loan.

The question going through my mind, if your son is added, he will then have assets. Could he take out a loan on your house, or part there of?

If your son fails to pay something, sued, liable for ????, could he be forced to sell his share, or if the house is shared, could the debt claim the whole house?

Should your son get married. and the marriage fail, will his ex-partner also have share in the house and be entitled a share or cash of half of his portion of your house? if so I would ask the above questions with her.

Should your son marry, then die, will his wifes name be transferred on to your deeds.


Yorkie1, it is not all about big salaries, but about flexibility and choices, doing the best for others, the people around you and yourself, rather than surrendering your hard earned cash to The Man so he can apply his own agenda.