Gift my daughter a house deposit.

npw

I am downsizing and want to give my 28 year old daughter £25000 as a house deposit. She lives in rented currently with a partner. Is it best I insist she gets a type of prenup to prevent her partner walking away in the future with her money gift. Or do I keep a 10% ownership of her £250 000 home? ( this might mean she couldn’t get a mortgage) Or do I put the money in my 5 year old granddaughters name? Also will my daughter have to pay income tax on the gift ?

davidmcn

If you want to give money towards the house deposit then you need to give the money to your daughter, with no strings attached. You can't keep it (and a share of the ownership), or give it to your granddaughter.

No, it isn't subject to Income Tax, or any other sort of tax (though potentially it could be considered part of your estate for Inheritance Tax purposes if you die within seven years).

MovingForwards

You could pay for your daughter and her partner to have a declaration of trust drawn up by a solicitor so if they split up, sell the property, buy one another out the first £25k, after mortgage redemption, estate agent fees and any other costs, goes to your daughter.

AnotherJoe

MovingForwards said:

You could pay for your daughter and her partner to have a declaration of trust drawn up by a solicitor so if they split up, sell the property, buy one another out the first £25k, after mortgage redemption, estate agent fees and any other costs, goes to your daughter.

Thats sort of what I did, but with a twist, the money remains mine,  i loaned my daughter the money for an indefinite period, repayable upon sale if i wanted, agreement signed and witnessed by solicitor. There is also a charge covering it. Otherwise if its daughters money might that not be taken into account in any split of finances in the event of a divorce?  

Downside, only a few lenders are happy with my approach.

hazyjo

AnotherJoe said:

MovingForwards said:

You could pay for your daughter and her partner to have a declaration of trust drawn up by a solicitor so if they split up, sell the property, buy one another out the first £25k, after mortgage redemption, estate agent fees and any other costs, goes to your daughter.

Thats sort of what I did, but with a twist, the money remains mine,  i loaned my daughter the money for an indefinite period, repayable upon sale if i wanted, agreement signed and witnessed by solicitor. There is also a charge covering it. Otherwise if its daughters money might that not be taken into account in any split of finances in the event of a divorce?  

Downside, only a few lenders are happy with my approach.

Indeed. Not many, probably even fewer in the current climate, will accept a borrowed deposit. If I were her partner, I'd not be impressed at having those restrictions forced upon me which would probably be at higher rates.

Anamox

If you go down the declaration (deed) of trust route please be aware that you can input an infinite amount of detail into the document so nobody can go against it in the future. They are very, very pointless if there are ways to dispute it based on it's vagueness. 

If the sole deposit is going to be from your daughter/yourself then you may want to include terms like:
- in the event of a breakup your daughter will be in charge of the sale of the property and will set the price to whatever she sees fit 
- in the event of a breakup 100% of the original deposit will go back to her regardless of who paid what after they moved in
- in the event of a breakup and the house losing equity, meaning the amount released from sale will be less than £25k, all equity UP TO 25k will be paid to your daughter

Try and think of all eventualities, and put it on the declaration of trust and get them both to sign it. You don't pay per clause, so get your moneys worth! Oh and on that front, a declaration of trust shouldn't cost more than £200-300... it may be worth doing it with an independent solicitor or deed of trust company rather than the company she uses for conveyancing.

blue_max_3

I wonder how the partner feels about this? I understand why you would want to do it, but it signals a distrust of them. It could put a strain on the relationship if handled insensitively. Just what came to mind.

[Deleted User]

npw said:

I am downsizing and want to give my 28 year old daughter £25000 as a house deposit. She lives in rented currently with a partner. Is it best I insist she gets a type of prenup to prevent her partner walking away in the future with her money gift. Or do I keep a 10% ownership of her £250 000 home? ( this might mean she couldn’t get a mortgage) Or do I put the money in my 5 year old granddaughters name? Also will my daughter have to pay income tax on the gift ?

Pre-nup?  Are they getting married?  Are you aware that prenuptial agreements are not legally binding in England or Wales?

If you are a joint ownership of the property then the purchase will attract the higher rate of SDLT as presumably you will own your own home and it will be worth more than £40k.  That's an extra £10k in tax if your daughter and her partner are eligible for the FTB SDLT relief.

Minors cannot own property in any legal jurisdiction of the UK so you'd need to look into setting up some kind of trust if you wanted your granddaughter to have some kind of stake in the property.

If you gift your daughter the money your daughter could get a Deed of Trust drawn up to protect the money in the event of a relationship breakdown.  The partner will want to take his/her own legal advice before agreeing to anything.

You could do as @AnotherJoe has done with his daughter and lend the money to your daughter providing she and her partner can find a mortgage lender willing to accept a borrowed deposit.  Alternatively you could look at something like Barclay's Springboard mortgage.

AnotherJoe

In my case it was half the value of the house so they got a great mortgage rate. 

Also, since there's another sibling, the reasoning was that this was to protect siblings inheritance (since half of it ultimately will be theirs, though via an unequal split of the will so first daughter won't need to sell house  !) 
ive no idea which if any lenders will accept such a cunning plan nowadays.  

Marvel1

Anamox said:

If you go down the declaration (deed) of trust route please be aware that you can input an infinite amount of detail into the document so nobody can go against it in the future. They are very, very pointless if there are ways to dispute it based on it's vagueness. 

If the sole deposit is going to be from your daughter/yourself then you may want to include terms like:
- in the event of a breakup your daughter will be in charge of the sale of the property and will set the price to whatever she sees fit 
- in the event of a breakup 100% of the original deposit will go back to her regardless of who paid what after they moved in
- in the event of a breakup and the house losing equity, meaning the amount released from sale will be less than £25k, all equity UP TO 25k will be paid to your daughter

Try and think of all eventualities, and put it on the declaration of trust and get them both to sign it. You don't pay per clause, so get your moneys worth! Oh and on that front, a declaration of trust shouldn't cost more than £200-300... it may be worth doing it with an independent solicitor or deed of trust company rather than the company she uses for conveyancing.

If I was the partner, I will be saying ***** it, especially the charge of sale and at their price. 

Comms69

npw said:

I am downsizing and want to give my 28 year old daughter £25000 as a house deposit. She lives in rented currently with a partner. Is it best I insist she gets a type of prenup to prevent her partner walking away in the future with her money gift. Or do I keep a 10% ownership of her £250 000 home? ( this might mean she couldn’t get a mortgage) Or do I put the money in my 5 year old granddaughters name? Also will my daughter have to pay income tax on the gift ?

There is no way to gurantee this money. Especially if they get married, but in anycase, the housing market could crash and they be in negative equity.

there is no tax to pay on gifts.