Helping grandchildren purchase their own home.

Not_Me

Sorry if this is the wrong section but I cannot see anything that fits my question.

I will be 69 this year with plenty of life in me yet, talking to my children about money and inheritance. They would prefer that I helped my 2 grandchildren get onto the property ladder instead.

I did a search and found the HMRC website which gave examples of gifting a lot of money away and tax being payable. The figures they used and was taxable went over £300,000. That is not the case for me. My property is approximately £110,000 to £120,000 going by the neighbours sales over the last 2 years. And I have slightly more in cash in various accounts earning not a lot of interest compared to 10 years ago.

My pension covers all my bills comfortably even taking 4 holidays a year.


This is getting rather long do I split it?

george4064

If you gift your grandchildren money, as long as you live for another 7 years it won’t be part of your estate and hence will be tax free.

Sea_Shell

69 is a bit young to be giving large sums away IMO. How do you know you won't need that money in the future?

eg Private health (hip OP c. £15,000)

How much are you talking as a percentage of your current net worth?

How much ready cash will you be left with?

Not_Me

2 Grandchildren under 25 (only just).

1 working at the same company for over 3 years, minimum wage but spends little and saves £500 per month living at home still. At a guess she may have close to £20,000 saved.

2. works hard but swapped jobs a few times and was unlucky to leave a fairly good job for something he thought he would prefer but turned out not to be the case. Fairly good job at the moment but its not a standard 40 hour week and the pay is up and down. Currently investing in tools to startup on his own.

Options?

How much can I gift them without paying tax?

Buy a house with Granddaughter and he pays rent which buys himself a share and they clear the small mortgage quickly?

I will be wanting to keep at least £50,000 myself, which leaves less than £100,000 for them which is not enough to purchase a property. Midlands if that makes any difference?

Sorry if this is rather long and in the wrong section and thank you to anybody that reads this far.

BoGoF

You can gift as much as you want and there are no tax implications for you or them at present. It only, potentially, comes an issue if you die within 7 years of making that gift.

I would question the wisdom of what you are doing tbh. Leaving yourself with £50k may sound a lot but really isn't.

A more modest approach would be for you to pay into a help to buy ISA for them. Sounds like they are not yet in a position to fund the costs of running their own home.

Sea_Shell

Giving away 2/3rds of your savings and leaving yourself only £50k for any of life's emergencies over the next 20+ years sounds very risky to me.

Also as another poster said, are your GC in a position to BE homeowners with all that that entails, buying the house is only the start!!!

getmore4less

There are no gift taxes in the UK.

That the easy part you can give everything away no "gift" tax.

if you give away an asset, that counts as a disposal so needs a CGT assessment(not applicable for your scenario)

now the bit that gets people confused the IHT stuff, people talk about it getting taxed, as if it somehow get taxed when it wouldn't have anyway.

The reality is this is no more than the IHT tax you would pay if you just kept the asset.

This applies to proper absolute gifts not those that are pretend gifts like a house you still live in.


Best to start with the big exemption the nil rate bands, these are £325k and up to £175k(for the house bit).

Then you have the potential to double through transferable from spouse.

This means if your total is less than £325k NO IHT, less than £500k and there is enough in a house NO IHT
upto £1m with both transferable nil rate bands and a house worth enough over the £650k bit NO IHT.


Based on your numbers(~£250k) you fit into the under £325k so IHT is not an issue you can give away as much as you like.
(You will get warned about deprivation of assets)

---

For those that creep over the nil rate band limits they have other options the key is gifts remain part of your estate but there are a rules on how long this is for.


There are some exemptions so the value drops out of the estate immediately

You will hear about the £3k per years one, there are others in that category for B'days Xmas wedding small gift...

There are also gifts from income which are handy if your still saving too much .

if a gift does not qualify for any of the above it then falls into the 7 year rule.

Any gift falls out after 7 years, until then it stays as part of the estate.

For big gifts(cumulative) that are over the nil rate band(at least £325k) there can be some IHT mitigation through taper relief.
Those that have this sort of gifting ability should be well up on this and/or taking advice.

chunkytfg

BoGoF wrote: »

You can gift as much as you want and there are no tax implications for you or them at present. It only, potentially, comes an issue if you die within 7 years of making that gift.

I would question the wisdom of what you are doing tbh. Leaving yourself with £50k may sound a lot but really isn't.

A more modest approach would be for you to pay into a help to buy ISA for them. Sounds like they are not yet in a position to fund the costs of running their own home.

Seem like a much more appropriate approach. Couple of years more to let both of them settle down and if you did HTB isa along with LISA's for them both you could essentially have got them both a good couple of grand extra from the Gov't without it coming out of your own savings pot:j

Not_Me

Thank you all for the very fast replies and suggestions.

My pension leaves me very comfortable. I do not spend half of it and as mentioned take 4 holidays a year. Not lavish holidays but all inclusive.

I have seen information on the help to buy ISA. Two versions with one being save £4000 and the other save £200 per month. The £4000 one sounds ideal and a better option.

Granddaughter possibly not ready yet, having the good life at home with few bills and no worries. But does want to buy a home, just the funds holding her back.

Grandson has left home and is currently renting. No savings that I am aware of.

I had a bit of an idea but not a whole plan about helping them buy one which my Grandson will live in and help clear the mortgage so they can sell and split it or help each other have their own.

Thank you all.

BoGoF

The fact your grandson has no savings would suggest he is not ready for home ownership and the associated costs. Buying a property for both of them could be a potential minefield - what if one doesn't want to sell and split the proceeds for example.

Money_maker

Are you talking about them living together? How will that work? What if they want to move away for work or one of them meets a partner and wants to buy a house with them?