Buying a house for kids

bingham40

My kids inherited just over 60k between them (theres 3 of them) a year ago and whilst we've moved house and are renovating our property i've completely ignored their money in a 0.5% account.

Recently i've been thinking i'd like to buy them a house (they are only 3, 5 & 7) so that hopefully by the time they are old enough to want to move out the mortgage would be cleared and they'd each own 1/3 of a house.

I've spoken to a couple of IFA's as I was thinking I could get a mportgage on the house in my name and manage the rental (and pay any shortfall in mortgage payments) on their behalf/for a trust etc but all the IFA's i've spoken to tell me that this isnt possible as it's a recognised tax dodge.

Am I being unrealistic to try and give my kids a leg up the property ladder for 20 years time or should I focus on more traditional investments, which seem easy to make on behalf of kids.

giddypenguin

If you have taken professional advice, and they say it isn't possible, then it sounds like it's not possible. Unless you'd like a knock on the door from the tax man.

Sorry, meant to add, not sure what good owning a third of a house would be to them - much better would be to have a nice cash deposit waiting for them when they want to buy?

BitterAndTwisted

I'm glad that you've "completely ignored" their inheritance as it's not yours to do anything with.

CLAPTON

is the money legally your childrens?
why ever is it in a savings a/c at 0.5%?

bingham40

In 20 years when they are all over 18 the mortgage would be cleared, the house would be sold, they'd each get a third of it as a deposit on their own house. The house would have tracked with the rest of the property market so they should have a hefty deposit.


The money was left to them individually and deposited in their nationwide child savings a/c's, which when I set them up only had pocket money in them hence 0.5%.

bingham40

What I meant to add was that the two ifa's I've spoken to weren't really sure and thought it would be viewed as a tax dodge.

Was thinking of setting up a trust. Can a trustor take out a mortgage on behalf of trustees?

BitterAndTwisted

It doesn't matter what your sketchy plans are: it's not your money to play with.

SuzieSue

bingham40 wrote: »

What I meant to add was that the two ifa's I've spoken to weren't really sure and thought it would be viewed as a tax dodge.

Was thinking of setting up a trust. Can a trustor take out a mortgage on behalf of trustees?

As far as I am aware, as long as the money isn't from you then any income generated (rent or interest etc) will be treated as as your children's money.

As they are under 18 years old, they can't own property, so you would have to set up a trust, but as B&T has said, I am not sure if you can do that as the money is theirs. You need to speak to an advisor who specialises in trusts.

bingham40

BitterAndTwisted wrote: »

It doesn't matter what your sketchy plans are: it's not your money to play with.

Er actually as their guardian I can do whatever I want with the money, including spending it on myself, a car, holiday etc. Luckily for my kids I want to invest the money for them. The choice of investment is down to whatever i think is best, at 3, 5 & 7 they cant make a decision about how to invest the money! It's no different than a more traditional long term investment. What should I do, leave the money in a .5 % a/c?

bingham40

00ec25 wrote: »

at the moment because of their age any income (interest) earned from their inheritannce pot is assessed against the parent for income tax purposes. If the parent invests their money in property then the only way would be via a trust - that will need legal advice to set it up properly so that rental income and eventual sale is also dealt with
It is not impossible, becuase its a "tax dodge", it is in fact perfectly possible, but needs to be done with professional legal advice, not the unqualified "knowledge" of an IFA who may have [passed some exams but is nowhere near a trust lawyer

many thanks, I'll speak to a trust lawyer next.

noh

00ec25 wrote: »

at the moment because of their age any income (interest) earned from their inheritannce pot is assessed against the parent for income tax purposes...........

That is not the case.
Each individual no matter what their age has a tax allowance and is liable to income tax.
If the parents were the source of the funds on which the interest was paid and that intertest exceeded £100 p.a only then would it be assesed as the parents income.
http://www.hmrc.gov.uk/tdsi/children.htm