Buying kids house for cash

densol_2

My ex ( not husband ) has inherited a lot of money from his mother. He wants to buy a house in the kids name ( aged 17 and 19 ) and rent it out. Its for me to protect the kids interest and make sure they are not taken advantage of as he would if he could. I think he intends to spend around £200k ( no mortgage )

Ive tried to think of issues that need to be addressed and discussed but would really welcome some thoughts from forumite experts

1. As one son is under 18 - they cant legally be on the deeds - wait till youngest is 18 ?
2. Put house in trust for them now ?
3. Set up company that owns house ?
4. They will both have to complete tax returns to account for the rent ? I suspect their father will take the rent off them
5. Im worried he wont agree to sell it when one wants to buy their own property ( he is very intimidating )
6. Owning a property means their first proper house will be a second property meaning the extra stamp duty ? Is this applicable if house in trust ?
7. Ex is not particularly savvy on legalities but the boys will be the " official " landlords and have all those responsibilities
8. Boys could no longer be " first time buyers " and not benefit from the advantages / Gov schemes that brings ?
9. Obviously they have an asset that is increasing in value for them so I dont want to veto the idea - but need to check its all done correctly

davidmcn

You can't just put a property into somebody else's name. Your children can, if they want, buy a property using money you give them. So, what do they want to do?

densol_2

davidmcn wrote: »

You can't just put a property into somebody else's name. Your children can, if they want, buy a property using money you give them. So, what do they want to do?

They will go along with what he wants and do the necessary, but have asked me to help them get it right etc

Penelope_Penguin

Why a house? There are all sorts of othe investments that may suit your children better.

I'd recommend you speak to an Independent Financial Adviser. See if you can get a personal recommendation from friends or family; alternatively, try here:

https://www.unbiased.co.uk

Mojisola

Sounds like a terrible idea.

NYM

You don't trust him for a reason...whatever it is, don't forget it.

xylophone

If the house is put in the names of the nineteen year old and in your name in trust for the seventeen year, then the children will be both the legal and the beneficial owners of the property?

The children's father is making them a gift and will need to record this for IHT purposes - with regard to the gift to the unmarried seventeen year old, this will be a gift into trust for his child and he will have to account for tax on the income as his own until the child is 18 - unless to avoid this he had set up a deed of variation on his mother's will.

https://www.gov.uk/trusts-taxes/parental-trusts-for-children

The nineteen year old and you as bare trustee for the seventeen year old become landlords with the responsibilities of landlords?

The rent is due to the children as legal and beneficial owners and you as trustee and the nineteen year old will have to complete tax returns?

As the property would not be a PPR for either child they would have to account for CGT on sale.

This whole plan seems fraught with difficulties - if he wants to invest his legacy in property, then let him do it in his own name?

AdrianC

If he buys a house in the kids' names, then it's their house.
Your ex cannot then rent it out, because it isn't his house.
The kids can ask him to manage the rental of their house, if they so wish, of course. Or they could rent it out themselves without his "help". Or they could live in it. Or they could sell it.

1. As one son is under 18 - they cant legally be on the deeds - wait till youngest is 18 ?

Correct.

2. Put house in trust for them now ?

Or there's that option, but that's a lot of paperwork to avoid waiting a few months.

3. Set up company that owns house ?

Again, a lot of paperwork. Who would own the company? The kids? No real benefit, then. The kids and their father, jointly? Well, why not just have him as a joint owner?

4. They will both have to complete tax returns to account for the rent ?

Of course.

I suspect their father will take the rent off them

Which would be theft or fraud.

5. Im worried he wont agree to sell it when one wants to buy their own property ( he is very intimidating )

He won't have any say in the decision, because it's not his house.

6. Owning a property means their first proper house will be a second property meaning the extra stamp duty ?

Of course. This will be their first "proper" house.

7. Ex is not particularly savvy on legalities but the boys will be the " official " landlords and have all those responsibilities

There is no "official" (in quotes) about it.

8. Boys could no longer be " first time buyers " and not benefit from the advantages / Gov schemes that brings ?

Of course.

9. Obviously they have an asset that is increasing in value for them so I dont want to veto the idea - but need to check its all done correctly

If he wants to gift them £200k, he's perfectly free to do so - whether that be in the form of a property that's been bought for them or not. Can't he just do it in cash for them to then invest however they see fit? I mean, they are adults (or will be in a few months), an' all. BTL is not necessarily always the best investment. You've identified some of the many potential pitfalls already, but the return is not always the best, either.

mrschaucer

So basically he wants to use his kids as a "front" if he's going to take the rent? Nice dad.

missbiggles1

Whether he has ulterior motives or not, basically he's giving each of the boys £100k so I wouldn't worry about government incentives for FTB because they'll each have very large deposits.

densol_2

Thanks all - Im not keen on this idea for all the reasons above