Buying a House in Trust

ld123098

elsien said:

How old is he now? 

He's just turned 14, and if all goes to plan, will be going college and university, so likely won't want to buy a property for himself for possibly 5 - 10 years, but that's a bridge we'll cross at the time. Me and my wife are capable of supporting his financial needs through higher education, so he doesn't need the money for that.
Cheers

davidmcn

ld123098 said:

elsien said:

So the house, the deposit, the mortgage and the business of being a landlord will all be in your name, with the intention of passing it on to him when you feel he is ready? 

Is any of the money your son’s in any legal sense, rather than money you and your wife have in your own names but earmarked for him (all being well) in the future? 

The savings are in a child savings account in his name, and my wife's name as being responsible (I'm not 100% how child savers work). And yes, that is exactly the plan. 

Right - the money is currently in his name. You want to transfer it from an account in his name, into a property which will be in your name. That isn't going to work, certainly not as a source of deposit for the purposes of a mortgage lender offering a mortgage in your name.

HappyHarry

As it is in a child's saver account, it is your son's money, not yours. You could use these funds to purchase a property in an absolute trust, but this will then revert to your son at age 18. If you were to use a trust that your son could not access at 18, and that you controlled, then this would effectively be stealing your son's money.  This isn't a judgement on you, but is the position that you will be in.

Purchasing a property in trust is extremely tax-inefficient, even if you could get a mortgage on it. If you need a mortgage, and house prices fall, then your son may end up with nothing or a debt at age 18 instead of his current assets.
 
Why not consider a Stocks & Shares JISA instead? 

AdrianC

ld123098 said:

The savings are in a child savings account in his name

They are his money.
How they got there is irrelevant now - they belong to him.

and my wife's name as being responsible (I'm not 100% how child savers work).

Your wife can get access to the money to buy things for his benefit.
But it is HIS money... and those things that get bought will be his property.

And yes, that is exactly the plan.

So how will he get a mortgage for the rest of the money?
It's hard enough for an adult non-home-owner with a job to get a BtL mortgage, let alone a child...

My thinking is that the rent will return better than savings

You do know there's plenty of other investment options than low-interest bank accounts or BtL, right?
https://forums.moneysavingexpert.com/categories/savings-investments

And please don't say "But I don't want risk..." because this plan is far higher risk than something like a FTSE tracker.

then when he's ready to get on the property ladder he can sell the property to use the equity as a deposit (which should have grown larger than the initial investment).

It's not just a passive investment, though...

You would be buying him a business. With his money.
He would have the legal responsibilities of that business - but he can't have, because he's too young.
Have you even worked out if it would be a good business to run? Would it be profitable? Or would it simply be a gamble on future house price growth?
Would it be profitable even with, presumably, management fees on top of the mortgage payments, and allowing for the voids and bad debts?
Who would be responsible for his income tax returns?
Who would be responsible for taking legal action against tenants if required?

And that's before we consider the loss of his first-time buyer status, and any benefits such as SDLT or eligibility for government assistance.

ld123098

davidmcn said:

ld123098 said:

elsien said:

So the house, the deposit, the mortgage and the business of being a landlord will all be in your name, with the intention of passing it on to him when you feel he is ready? 

Is any of the money your son’s in any legal sense, rather than money you and your wife have in your own names but earmarked for him (all being well) in the future? 

The savings are in a child savings account in his name, and my wife's name as being responsible (I'm not 100% how child savers work). And yes, that is exactly the plan. 

Right - the money is currently in his name. You want to transfer it from an account in his name, into a property which will be in your name. That isn't going to work, certainly not as a source of deposit for the purposes of a mortgage lender offering a mortgage in your name.

This is kind of what I'm asking, can the property be in his name but in some sort of trust? 

ratechaser

Ah, so this is going to be another of those threads where the parent needs reminding that it's not their money to do with as they wish any more because it has been gifted to their child. That's the sort of trade off that comes with putting it in the child's name, and in an account that is no doubt earning a lot more interest than the parent could if it was in their name...

OP, FWIW, I fall on the side of thinking that your intentions are good here, but the plan itself is terrible for all the reasons previously mentioned. And the icing on the cake is your suggestion that the house that their savings have gone into buying, would not transfer to them at age 18.

Back to the drawing board - seriously.

elsien

If he’s 14 he’s old enough to have an opinion on money that will be fully his in 4 years time.
You may want him to save it for a property but that’s not everyone’s dream. He might prefer to widen his experience by going travelling, for example. Or to buy a car. Or whatever.
With the best will in the world, would he want you restricting his options in that respect when he hits 18? 

And that’s before you get into the loss of first time buyer incentives, and everything else. 

ld123098

HappyHarry said:

As it is in a child's saver account, it is your son's money, not yours. You could use these funds to purchase a property in an absolute trust, but this will then revert to your son at age 18. If you were to use a trust that your son could not access at 18, and that you controlled, then this would effectively be stealing your son's money.  This isn't a judgement on you, but is the position that you will be in.

Purchasing a property in trust is extremely tax-inefficient, even if you could get a mortgage on it. If you need a mortgage, and house prices fall, then your son may end up with nothing or a debt at age 18 instead of his current assets.
 
Why not consider a Stocks & Shares JISA instead? 

Thanks for the input. I'll have a look.

Nobbie1967

ld123098 said:

elsien said:

So the house, the deposit, the mortgage and the business of being a landlord will all be in your name, with the intention of passing it on to him when you feel he is ready? 

Is any of the money your son’s in any legal sense, rather than money you and your wife have in your own names but earmarked for him (all being well) in the future? 

The savings are in a child savings account in his name, and my wife's name as being responsible (I'm not 100% how child savers work). And yes, that is exactly the plan. My thinking is that the rent will return better than savings, then when he's ready to get on the property ladder he can sell the property to use the equity as a deposit (which should have grown larger than the initial investment).
Thanks for your time.

So the savings are your child’s, but with your wife in control until they reach 16. This makes your plan very complicated and probably impossible. This info is from elsewhere on this site about child savings account.

“..and understand whose money it is

It's worth remembering if the money's in your child's name, it's your child's cash. Yet if you're worried that by putting £1,000 in their name they'll splash out on 100 apps, a Nintendo Switch and enough sweets to give a junior school a sugar rush, don't be. Many accounts will allow the adult to stay in control of the cash until the child turns 16. When they do, the cash is technically theirs to do with what they wish.”

hazyjo

ld123098 said:

hazyjo said:

But it's his money. Why don't you buy a property if that's what you want to do, or make other investments, with your money and sell it/cash it in and gift him the money later.

He might not even want to own a property! Not everyone does.

How old is he? A child, or teens? I mean, can he actually have any input or opinion with this decision?

He's a child, why would I give him an input. All he's interested in is playing Fortnight. If I gift him a large amount of money I assume he'll pay tax. 

Because it's not your money and I didn't know how old he was.

What it will look like to any lender (or bank, government or whoever) is that you've held your money in a child's account as it's got much better interest rates, then taken it out for your use.

No, there's no tax on gifts. If you die within 7 years there will be tax to pay on a portion of it. Prob a simplified version that others may wish to expand on.