Buying a House in Trust

TN1984

What does the child savings account say about when it becomes his account? As far as I am aware, many of these accounts convert to an account in the child's name by 18 anyway, so I would suspect for this particular money it is already too late to restrict his access to any later than 18 as once it is in the child savings account it has already been gifted to him.

There are plenty of options for any other money you want to put aside for him, but I think the property idea is going to be difficult to achieve (in terms of mortgage issues and so on mentioned by others), expensive and high risk (you are borrowing to invest which magnifies losses/gains, so if property prices go down rather than up, your losses are amplified by the fact it is a leveraged investment).

I would personally say a regular payment into an investment account would make more sense than a property in this case, especially if you don't have other separate money for the deposit. Several options here, depending on your circumstances. You could use a Junior ISA for him, but then that becomes his money without restrictions at 18, so doesn't really fit in with your desire to retain control. You could set up a trust and pay in regularly, however, again the problem is if it is solely for his benefit (i.e. an absolute trust), it becomes his money at 18 anyway. There are other trust structures, but whether you could use them here would require legal advice, probably not worth the cost unless you have a significant sum to invest right now. Alternatively you could build up an investment in your name and gift it when you feel the time is right; you can gift any sum of money outright to an individual and there are no immediate tax consequences on that money (look up 'Potentially Exempt Transfers'). There MIGHT be inheritance tax due if you died within 7 years of making the gift, but that would depend on the value of your other assets, and how your estate would be allocated.

TN1984

I would also just add that I think the concept of 'getting on the property ladder' does not necessarily mean you need to hand over a property. Providing a sum of money for a deposit can achieve the same thing, and actually would probably be more useful as it would allow your son to buy a house of his choosing, without needing to sell another one first. Depending how it was all structured, there would potentially also be other factors to consider such as capital gains tax and potential loss of first time buyer incentives (whatever they might be in the future).

ld123098

Windofchange said:

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 

I did exactly the same, which is why I'm trying to be cautious now on his behalf. I know people think that you learn from your mistakes, but some mistakes are extremely costly and can put you back years, and his windfall is going to be substantially larger than mine. Cheers for the input

ld123098

TN1984 said:

I would also just add that I think the concept of 'getting on the property ladder' does not necessarily mean you need to hand over a property. Providing a sum of money for a deposit can achieve the same thing, and actually would probably be more useful as it would allow your son to buy a house of his choosing, without needing to sell another one first. Depending how it was all structured, there would potentially also be other factors to consider such as capital gains tax and potential loss of first time buyer incentives (whatever they might be in the future).

I was under the impression that he'd be taxed if I gifted him, which is where the idea of buying a house in trust for him came from, but it appears I was wrong, so it simplifies things a lot for me. 

SDLT_Geek

If a property is bought in trust for a person under the age of 18, then for the purposes of the 3% surcharge to stamp duty land tax, any properties belonging to the parents get taken into account.  So I would expect the 3% surcharge to apply to the purchase.

I agree with others who have said that the money in the account presently belongs to the child.

getmore4less

ld123098 said:

TN1984 said:

I would also just add that I think the concept of 'getting on the property ladder' does not necessarily mean you need to hand over a property. Providing a sum of money for a deposit can achieve the same thing, and actually would probably be more useful as it would allow your son to buy a house of his choosing, without needing to sell another one first. Depending how it was all structured, there would potentially also be other factors to consider such as capital gains tax and potential loss of first time buyer incentives (whatever they might be in the future).

I was under the impression that he'd be taxed if I gifted him, which is where the idea of buying a house in trust for him came from, but it appears I was wrong, so it simplifies things a lot for me. 

I think you need to go back to very basics of  finances and tax here doing a lot more research.

Getting the basic taxes on gifts so wrong suggest quite a lot of gaps in your knowledge  and a long way to go before you even think about trusts.

Rather than simpler it may well have made it more complicated.
Why do you think it is simpler good idea to put up the new scheme in case that is also full of holes.


The need for further lending through a mortgage makes it even more complicated.

Unless you drop all "its for the kid" stuff  and just get into a letting business yourself.

Which comes with a whole new set of problems I suspect you are not aware of yet



 

ld123098

getmore4less said:

ld123098 said:

TN1984 said:

I would also just add that I think the concept of 'getting on the property ladder' does not necessarily mean you need to hand over a property. Providing a sum of money for a deposit can achieve the same thing, and actually would probably be more useful as it would allow your son to buy a house of his choosing, without needing to sell another one first. Depending how it was all structured, there would potentially also be other factors to consider such as capital gains tax and potential loss of first time buyer incentives (whatever they might be in the future).

I was under the impression that he'd be taxed if I gifted him, which is where the idea of buying a house in trust for him came from, but it appears I was wrong, so it simplifies things a lot for me. 

I think you need to go back to very basics of  finances and tax here doing a lot more research.

Getting the basic taxes on gifts so wrong suggest quite a lot of gaps in your knowledge  and a long way to go before you even think about trusts.

Rather than simpler it may well have made it more complicated.
Why do you think it is simpler good idea to put up the new scheme in case that is also full of holes.


The need for further lending through a mortgage makes it even more complicated.

Unless you drop all "its for the kid" stuff  and just get into a letting business yourself.

Which comes with a whole new set of problems I suspect you are not aware of yet



 

If I can can gift him without gift tax, there's no need to buy the house in his name or with his money, I can just buy it in my name with my money, and gift it to him in a few years, so a trust isn't needed. That's why it simplifies things. Unless I've misunderstood what the other members have suggested.....

lucypilates

ld123098 said:

Windofchange said:

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

I did exactly the same, which is why I'm trying to be cautious now on his behalf. I know people think that you learn from your mistakes, but some mistakes are extremely costly and can put you back years, and his windfall is going to be substantially larger than mine. Cheers for the input

You are probably doing him a dis-service if you try to stop him experiencing 'failure' or 'mistakes' ... in fact, the earlier they get these lessons out of the way, the sooner they learn to make positive choices. Yes, it might be a large sum of money and you'll be gutted for him but he'll also be very aware that you don't trust him by your actions, which in turn, could make him less likely to make positive choices!! Sorry, i know this isn't a psychology forum but i've seen it all roll out in my own family and i'm having same fears for my own teenager ... but I KNOW that I have to trust that they will get it right in the end, for the sake of our relationship! Good luck - i'd be looking at Junior stocks and shares if it were me ..

getmore4less

ld123098 said:

getmore4less said:

ld123098 said:

TN1984 said:

I would also just add that I think the concept of 'getting on the property ladder' does not necessarily mean you need to hand over a property. Providing a sum of money for a deposit can achieve the same thing, and actually would probably be more useful as it would allow your son to buy a house of his choosing, without needing to sell another one first. Depending how it was all structured, there would potentially also be other factors to consider such as capital gains tax and potential loss of first time buyer incentives (whatever they might be in the future).

I was under the impression that he'd be taxed if I gifted him, which is where the idea of buying a house in trust for him came from, but it appears I was wrong, so it simplifies things a lot for me. 

I think you need to go back to very basics of  finances and tax here doing a lot more research.

Getting the basic taxes on gifts so wrong suggest quite a lot of gaps in your knowledge  and a long way to go before you even think about trusts.

Rather than simpler it may well have made it more complicated.
Why do you think it is simpler good idea to put up the new scheme in case that is also full of holes.


The need for further lending through a mortgage makes it even more complicated.

Unless you drop all "its for the kid" stuff  and just get into a letting business yourself.

Which comes with a whole new set of problems I suspect you are not aware of yet



 

If I can can gift him without gift tax, there's no need to buy the house in his name or with his money, I can just buy it in my name with my money, and gift it to him in a few years, so a trust isn't needed. That's why it simplifies things. Unless I've misunderstood what the other members have suggested.....

As long as you pay your CGT bill when you gift it to him.

SDLT_Geek

getmore4less said:

As long as you pay your CGT bill when you gift it to him.

And in any event accept that the extra 3% SDLT will be due on the purchase.