Buying a House in Trust

GDB2222

Whilst there are difficulties, I think that the OP is absolutely right in what he is trying to achieve. Savings accounts essentially pay no interest at the moment, so the account is diminishing in value each year due to inflation. 

Unfortunately, as pointed out above, the OP will be taxed on the income until his son is 18. At that point, it is hard to prevent the lad getting his hands on the money, if he is really determined to do so. In practice, he may not be at all interested, and he may be happy to let dad continue to look after his BTL.

Bear in mind, if you are unused to filling in tax returns, that it is quite a big deal. Plus BTL is a pretty technical business. 

You could settle for a simple life and just invest the money in shares for him. Maybe an investment trust?

SDLT_Geek

ratechaser said:

SDLT_Geek said:

DairyQueen said:

I simply cashed-in the account and transferred to an ISA in my father's name (I use my ISA allowance, he doesn't). 

This does not sound right!

No it's absolutely not right. If you are going to open a savings account for a child, and therefore take advantage of the higher interest rates that children's savings attract, then you MUST do so from day one on the basis that the money will be under the child's control the moment they turn 18.

if you don't want that - and I can sympathise with that position - then don't pay money into a child's account in the first place. But pulling it out after 15 years is fundamentally wrong, if not downright fraudulent. 

At least it is not as bad as the OP on this thread https://forums.moneysavingexpert.com/discussion/6231601/property-funds-in-child-accounts/p1 who was proposing to withdraw funds from accounts in OP's baby daughter's name and use them for OP's own purchase!

xylophone

For the first five years the money was held in child savings accounts (me as trustee) but the hassle of administering these led me toward ISAs. JISA was not available at the time so I simply cashed-in the account and transferred to an ISA in my father's name (I use my ISA allowance, he doesn't). 

This was not legally correct.

If you had decided that you no longer wished to make gifts to the children, then you should have left the accounts as they were and stopped contributing.

Taking money that beneficially belonged to the children and giving it to your father was simply wrong.

steampowered

This is such an awful idea, please don't do it. 

- You are denying your son access to first time buyer benefits. When he comes of age he won't qualify for first time buyer stamp duty relief; or Lifetime ISAs; or help to buy; or anything of the sort.
- It's tax inefficient. You are just spaffing money up the wall on letting agent fees, income tax, estate agent fees on sale, capital gains tax and all the rest of it.
- You have no right to be taking out a mortgage on your son's property.
- What 18 year old wants the legal responsibility of being a landlord?

Instead, you should take out a normal investment. Normal stock market investments return 7-8% per year on average, so it will be more profitable than a buy-to-let anyway. Go and open a Junior ISA, invested in a passive stock market fund.

If you've never really had any money, you may think that the only choices for using money are "cash savings account" or "property", but that's simply not true. You should be investing.

Go over to the savings & investments forum!

DairyQueen

xylophone said:

For the first five years the money was held in child savings accounts (me as trustee) but the hassle of administering these led me toward ISAs. JISA was not available at the time so I simply cashed-in the account and transferred to an ISA in my father's name (I use my ISA allowance, he doesn't). 

This was not legally correct.

If you had decided that you no longer wished to make gifts to the children, then you should have left the accounts as they were and stopped contributing.

Taking money that beneficially belonged to the children and giving it to your father was simply wrong.

Yes, I agree. It wasn't legally correct but the circumstances were/are such that we had little choice.

This was morally the correct thing to do. It was either do this or not save for them at all. My parents are not sufficiently wealthy to handover large chunks of cash but they wanted to do something to help their grandchildren from the day number one was born.

We did not wish to cease gifting. To the contrary, we wished to continue gifting. My father is one of the donors of the funds. Half of the contributions are received from him and the other half from me. We are still contributing.

There is great difficulty in running savings accounts for children if you are not the child's parent. It involves visits to branches, production of passports and birth certificates, proof of addresses, and a complete paper trail to show change of name (mine). All this for a few pounds in annual interest. It simply isn't worth the hassle.

The easy route would be to hand over the cash to the children's parents for them to open JISAs. Unfortunately, that was not an option. We guessed (correctly) that unless we saved for my nephews there would be zero funds for them in young adulthood. Without this money there will be nothing to fund university, cars/driving lessons, house deposits. 

The money (then a few thousand) was transferred to an ISA when the children were aged 6 and 4 (now almost 16 and 14). We have continued to add a modest monthly amount and periodically I have invested chunks into a global tracker. The markets have been kind and the returns have been generous. The ISA is worth several times more than it would have been if left languishing in a child's savings account.

There is no chance of my parents paying IHT but this danger is worth a mention for those with larger estates. There is a risk of the survivor of them requiring care but the requirement to use the ISA is small as they have sufficient equity in their property to cover several years of care. The survivor of them will inherit all of their assets (including the ISA). On second death, I and the children's father are the only beneficiaries of their estate. My brother would not purloin an investment that he knows is intended for his children. I will not be helping myself to an investment that I and parents have spent decades saving for the children.

My eldest nephew will be going to uni in two years. After all of these years of saving my parents will have the pleasure of helping him. The same will apply to the youngest in due course. The gift will not be wasted/lost. It has not been devalued in real terms.

It was our money to gift and this is the method we chose given the lack of viable/practical alternatives  No regrets at all.