Buying a property in Son's name?

IamWood

Dear All,

I am starting a new job and would like to buy a property with one or two beds to sleep in for 3/4 days during the week. Chances are my son will also share the property with me in a few years for his potential job. I already own a property that has been paid off. I wonder what the best options are for me to make the purchase. Should I buy it as a second resident property (which implies a 3% extra stamp duty) or buy the property in my son's name with cash through remortgaging my current property. I'm happy to gift him the total amount now instead of future inheritance.

My mortgage advisor advised me to re-mortgage my current property only because it would be cheaper with lower interest rates (1.44% instead of 1.83%).

Any advice and comments would be really appreciated.

Thanks very much in advance.

tafelmoneysaver

Personally I'd want to make sure that I would retain full legal rights of ownership and residency. 

If you purchase in someone else's name, what is stopping them selling it whenever they (or someone they owe money too) choose????

cx6

If you buy it in your name, it will indeed be counted as a second property and you will have to pay the 3% stamp duty surcharge. If your intention is that in the future your son would inherit it, then it will be subject to Inheritance Tax rules in the normal way. However, you would retain control of the asset until then ie it would be yours.

You probably cannot 'buy it in his name' but you can certainly gift him the money tax free and he can buy it. If it is his only / main property then any increase in value would not be subject to CGT. Provided you live for 7 years there will be no IHT to pay. You do, however, lose control of the money ie it will be his. Also, should in future you need to apply for mean-tested benefits they MAY regard your gift as deliberate deprivation of assets (depending on how long ago it was).

Brie

Does your son want to own a property?

IamWood

Brie said:

Does your son want to own a property?

My son should have no problem owning property but in practice, I would maintain it before he graduates from his uni anyway. The property would be a great location to travel to London if he would like to work there. That's my intention to purchase it before I start my new job there.

IamWood

cx6 said:

If you buy it in your name, it will indeed be counted as a second property and you will have to pay the 3% stamp duty surcharge. If your intention is that in the future your son would inherit it, then it will be subject to Inheritance Tax rules in the normal way. However, you would retain control of the asset until then ie it would be yours.

You probably cannot 'buy it in his name' but you can certainly gift him the money tax free and he can buy it. If it is his only / main property then any increase in value would not be subject to CGT. Provided you live for 7 years there will be no IHT to pay. You do, however, lose control of the money ie it will be his. Also, should in future you need to apply for mean-tested benefits they MAY regard your gift as deliberate deprivation of assets (depending on how long ago it was).

We have a very close bond in the family as far as I feel. If he wants to throw the money away for all sorts of reasons, then it's my lesson to learn as a father and I'm fine with it.

I don't think I'll be qualified for any benefit considering my current financial situation. However, who knows.

My wife does not like the idea to spoil my son to have everything prepared for him. We earned everything ourselves without any help from anybody.

eskbanker

IamWood said:
The property would be a great location to travel to London if he would like to work there.

IamWood said:

My wife does not like the idea to spoil my son to have everything prepared for him. We earned everything ourselves without any help from anybody.

I think I'd be inclined to agree with your wife - why not just make your own living arrangements, while offering arms-length financial support for your son in whatever his chosen career is, rather than (apparently) assuming that he'd choose to work where you're going to?   Has he opened a Lifetime ISA yet, for example?

Grumpy_chap

IamWood said:

Dear All,

I am starting a new job and would like to buy a property with one or two beds to sleep in for 3/4 days during the week. Chances are my son will also share the property with me in a few years for his potential job. I already own a property that has been paid off. I wonder what the best options are for me to make the purchase. Should I buy it as a second resident property (which implies a 3% extra stamp duty) or buy the property in my son's name with cash through remortgaging my current property. I'm happy to gift him the total amount now instead of future inheritance.

My mortgage advisor advised me to re-mortgage my current property only because it would be cheaper with lower interest rates (1.44% instead of 1.83%).

Any advice and comments would be really appreciated.

Thanks very much in advance.

I suspect that IHT (inheritance tax) and senior care are far from your mind in this, as you sound like you have a good many years before these become pressing concerns (based on a fair roll of the dice).

If you are buying a property, or gifting your son money to buy a property, on the basis that you can live there and use the property four nights per week until you cease working, then that would be a GWR (gift with reservation) and not discounted from your estate for IHT purposes.

If you buy the property in your own name, you will be the second property SDLT (stamp duty).  That can be avoided if you buy the property in your son's name.  However, the following should be considered in regard to your son owning a property that he does not live in:

• If your son chooses to buy a property, he will then be subject to second property SDLT
• You did not mention what your son is studying but more of the country is outside London than in it so there's no guarantee he'll want to live in commuting distance of London (unless you know your son has a specific job lined up)
• Not all of London is readily commutable from all of London.  (Hope that makes sense.)
• If your son ever wishes to claim benefits, this will be impacted by owning a property
• If your son has debts, recovery actions could be taken against the property
• Will you pay rent to your son?

IamWood

eskbanker said:

IamWood said:
The property would be a great location to travel to London if he would like to work there.

IamWood said:

My wife does not like the idea to spoil my son to have everything prepared for him. We earned everything ourselves without any help from anybody.

I think I'd be inclined to agree with your wife - why not just make your own living arrangements, while offering arms-length financial support for your son in whatever his chosen career is, rather than (apparently) assuming that he'd choose to work where you're going to?   Has he opened a Lifetime ISA yet, for example?

Thanks. He just made his first payment to his Lifetime ISA this year.

IamWood

Grumpy_chap said:

I suspect that IHT (inheritance tax) and senior care are far from your mind in this, as you sound like you have a good many years before these become pressing concerns (based on a fair roll of the dice).

If you are buying a property, or gifting your son money to buy a property, on the basis that you can live there and use the property four nights per week until you cease working, then that would be a GWR (gift with reservation) and not discounted from your estate for IHT purposes.

If you buy the property in your own name, you will be the second property SDLT (stamp duty).  That can be avoided if you buy the property in your son's name.  However, the following should be considered in regard to your son owning a property that he does not live in:

• If your son chooses to buy a property, he will then be subject to second property SDLT
• You did not mention what your son is studying but more of the country is outside London than in it so there's no guarantee he'll want to live in commuting distance of London (unless you know your son has a specific job lined up)
• Not all of London is readily commutable from all of London.  (Hope that makes sense.)
• If your son ever wishes to claim benefits, this will be impacted by owning a property
• If your son has debts, recovery actions could be taken against the property
• Will you pay rent to your son?

Thank you very much. Lots of good points which I have not thought of.

Albermarle

To add another note of caution . Your son could meet a life partner and get married . In which case half the house could belong to them , if there was a break up . Or at least they would have a claim on it. It's not unheard of for some marriages to fall apart in just a couple of years