Purchasing property for 10 year old

Mr_Jones

Davesnave wrote: »

While it isn't right to make accusations without evidence, it's likely O&U was voicing thoughts many others of us were having silently., because despite being anonymous, you did not explain how the child came by the money.
That's important, as xylophone has explained.

As they say, 'The road to hell is paved with good intentions,' so you need to work out the best options for your child and you.

Since she was born we have each put away around £100 per month so she has money when she is older to purchase a car/house and for University if needed. Over the years half of this money has gone in a building society and the other half is now in a JISA. Perhaps purchasing a house for her now is not the best idea after reading all this but without asking the question to gather comments then I would not know.

00ec25

Mr_Jones wrote: »

Since she was born we have each put away around £100 per month so she has money when she is older to purchase a car/house and for University if needed. Over the years half of this money has gone in a building society and the other half is now in a JISA. Perhaps purchasing a house for her now is not the best idea after reading all this but without asking the question to gather comments then I would not know.

then do you know, and have you checked, your own liability for income tax payable by you on the interest received by your child outside of the JISA?

https://www.gov.uk/savings-for-children

Grenage

steampowered wrote: »

It's a complete nightmare. Please open a Junior ISA and invest the money in a stocks and shares fund instead. Much lower risk, much better returns, much more tax efficient, doesn't damage your daughter's attempts to become a first time buyer when she is older.

This would be so much simpler. My S&S ISAs have kicked the crap out of property values increases as a percentage.

Mr_Jones

00ec25 wrote: »

then do you know, and have you checked, your own liability for income tax payable by you on the interest received by your child outside of the JISA?

https://www.gov.uk/savings-for-children

Thanks for the link - I have double checked this and we are fine not to pay tax on the money we have saved for our daughter.

Smodlet

Mr_Jones wrote: »

Thanks for the link - I will double check this but I believe we are fine not to pay tax.

"You believe"? I can see that flying with the tax office. Time to find out for sure, surely?

xylophone wrote: »

How did the child come by what appears to be a substantial sum of money?

Did you give this money to your child?

If so, are you aware of the "£100 rule" in respect of interest arising on these funds?

https://www.thisismoney.co.uk/money/experts/article-4025172/Can-save-money-child-s-saving-account-better-rate.html

If (as seems more likely) the money was a gift/bequest to the child, the rule does not apply but wherever it came from the child is the absolute beneficial owner of the money and you are only a "bare trustee".

If it was a bequest under will trust, what powers of investment were granted?

The child cannot legally make a loan to another person and you are not entitled as her trustee to borrow those funds for yourself.

The child cannot own real estate in her own name.

If there were enough money held in her own name to buy a property, the property would have to be held in bare trust for the child - the child would be the absolute beneficial owner of the asset and of any income arising - this would be taxable income and HMRC would need to be advised.

AS the child would have a beneficial interest in the property, this would lead to loss of FTB status - it would not be the child's PPR so CGT questions would arise on sale.

It appears that there is not enough money held by the child to buy a property outright.

The Trust would therefore need to borrow to buy a property.
Presumably the idea would be that the rental income would cover the repayments but what would happen in the event of voids?

Would the Trustees need to borrow from themselves as private individuals to meet the costs, thus creating a debt for the Trust?

If you have the powers of investment of your child's money, and there is a substantial sum involved, you would be better taking the advice of an IFA if you do not feel qualified to make such decisions yourself.

My muse has not visited since much-missed-feline-muse left this mortal coil; unfortunately, OP, I have just been so possessed so apologies in advance. Ahem...

Look for the bare necessities,
You're just a bare trustee, you see,
Forget about your money and your strife
'Cos child's the beneficiary
So leave the bequest, let it be
It's hers, you see, so let her run her life.

... Yeah, man.