Buying a House in Trust

davidmcn

ld123098 said:

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? 

In theory it could, but it's the mortgage which makes it trickier as this sort of thing is too complicated for most lenders to bother with.

ld123098

ratechaser said:

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.

Thanks for your input, and objectivity. Child savers do pay better than adult accounts, but are still poor in my opinion. And my intentions most certainly are good. I don't want to take from my son, quite the opposite, I'm just keen to seen him get a decent start in life at the right time, nothing else. I certainly don't mind criticism of the plan, but why would people assume that I'm out to rob my son of money that I gave him, and already have access to if I wanted? It makes no sense. 

ld123098

elsien said:

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. 

Everyone needs somewhere to live though. A car I can help with. Cobbling tens of thousands of pounds together overnight I can't. Which is why I wanted to make sure there was a deposit ready for him when the time comes. I might have to look at other options. Cheers

ld123098

hazyjo said:

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.

So I could leave his savings alone, buy a house to rent out in my name, and give it to him when he's ready, or sell it and give him the money, and he wouldn't be hit with a tax bill? This would simplify things. I don't know why, but I was under the impression that parents could only gift their children £3k per year per parent without paying tax.....

davidmcn

ld123098 said:

hazyjo said:

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.

I was under the impression that parents could only gift their children £3k per year per parent without paying tax.....

That's just the main exemption from the lifetime gift rules, so only relevant during the final 7 years of your life.

ld123098

davidmcn said:

ld123098 said:

hazyjo said:

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.

I was under the impression that parents could only gift their children £3k per year per parent without paying tax.....

That's just the main exemption from the lifetime gift rules, so only relevant during the final 7 years of your life.

Sorry to sound daft, but does that mean providing I live for 7 years or longer, I can gift him what I like tax free. The whole idea of using his money and putting it in his name was to avoid a large tax bill for him, so if this is the case it's an easy step forward for us.

ratechaser

ld123098 said:

ratechaser said:

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.

Thanks for your input, and objectivity. Child savers do pay better than adult accounts, but are still poor in my opinion. And my intentions most certainly are good. I don't want to take from my son, quite the opposite, I'm just keen to seen him get a decent start in life at the right time, nothing else. I certainly don't mind criticism of the plan, but why would people assume that I'm out to rob my son of money that I gave him, and already have access to if I wanted? It makes no sense. 

No problem, as you can tell, this basic question (in various different flavours) comes up from time to time. There have been some pretty egregious examples where, for example, a parent wants to empty their kids account to help buy a bigger house. Ah well, it's still for the benefit of the child, right? And they will probably inherit it in another 50 years or so...? And it was my money that I put in to the account anyway...?

The problem here is you get into very murky waters around utilising money for a child once it's in their account, especially when there's a complex rationalisation that has to be constructed as to why it's 'for their own good in the long run'... and that's where words like fraud start to creep in to a thread - if not of the child, then of the financial institution that's paid a higher interest rate on the account.

Your situation looks a bit different - it's well intentioned but not well thought out. My hair would stand on end at the prospect of becoming a landlord, and what's left of it would fall out completely if I thought I'd push that responsibility unasked onto my children, even a year or two after turning 18. Losing FTB benefits is not to be ignored either. And then there's the capital risk of a single investment (even if we all like to think that you can't go wrong with bricks and mortar)

So I know you've had some forthright advice here, but I hope you'll take it in the spirit it's intended - good luck to you and your son.

moneysavinghero

ld123098 said:

elsien said:

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. 

Everyone needs somewhere to live though. A car I can help with. Cobbling tens of thousands of pounds together overnight I can't. Which is why I wanted to make sure there was a deposit ready for him when the time comes. I might have to look at other options. Cheers

But your son won't have anywhere to live - you won't let him live in his own house so he either has to stay living with you or find a deposit from somewhere to buy a place of his own (pity you already spent his deposit on a house you control whether he can move into or not). He would also end up having to pay an extra 3% Stamp Duty when he does buy his own house because he already owns another property.

I am sure that your intentions are good, but you run the risk of your son resenting you and viewing your behaviour as controlling (hey son you now own a house where i chose it to be but you cant move into until i say so and if you want to buy your own anyway it will now be more difficult).

davidmcn

ld123098 said:

davidmcn said:

ld123098 said:

hazyjo said:

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.

I was under the impression that parents could only gift their children £3k per year per parent without paying tax.....

That's just the main exemption from the lifetime gift rules, so only relevant during the final 7 years of your life.

Sorry to sound daft, but does that mean providing I live for 7 years or longer, I can gift him what I like tax free.

Free of Inheritance Tax, yes - you'll potentially have a Capital Gains Tax liability if you transfer a house to him which isn't your main residence (based on the then market value), assuming you've made a gain in value, though whoever owns it will be mounting up a CGT liability anyway so that's probably more of a neutral point.

Windofchange

My other half's mum did this for her about 5 years ago. It would have royally screwed us over on stamp duty when we came to buy our current house as we were then second property owners and therefore liable for the higher rate SDLT. Luckily for us the stamp duty exclusion came into play just before we completed, otherwise it would have meant an extra £13k of duty. This is possibly a consideration for you and your son? I do agree with you about the squandering it all part - I had a windfall when I was 19 and brought a fast car and a few holidays :-D