Buying house for Son

mcn99

Hi,

Looking for some advice.

I've started looking at buying a small house/flat for son, to fund this im planning on using pension TFLS plus some savings we have.

Becasue the money wont be a pure gift, i do want to protect the money from him doing something stupid, I dont really trust him.

I'm not expecting the loan to be paid off, but i want to make sure if he ever sells  the property i would get the money back.

Is setting up a deed of trust, the normal way to protect the money, and would this impact stamp duty, it would be bought in his name.

What is the normal way of writting this off if both wife and myself kick the bucket without it being liable to IHT.

TIA

 

  

MalMonroe

My advice would emphatically be don't do it. 

You don't trust your son, yet you'd be using your own savings and some pension funds to buy him a property?

How old is your son and does he work?

Why not use your money for you while you and your wife can enjoy it. If your son is an independent adult then surely he doesn't need your financial help? 

You are well aware that buying a property for your son will be a huge financial risk - why do that to yourselves? 

Obviously it's always nice if we can give our children things but in this case I'd be tempted just to give him a lump sum that you can afford without using and losing the money that you have worked hard for. I'm also a firm believer in that thing where when people have to work hard for what they want, they appreciate it more. If things are just given to people, that's when they think that the world owes them a living. 

Of course, that's just my opinion - because I think you and your wife deserve to benefit from your own past hard work, savings and pensions.

mcn99

Son is 25 not working, but hoping he will be in full time education this year. He currently lives with us.

Buying the property could potentially delay my retirement by a year or so. But we have decent pension pots, and no real debts, so we wont be struggling if we do buy a house.

After what other people do when buying a house for their kids, and if they take out a deed of trust to protect themselves.

Snookie12cat

mcn99 said:

Son is 25 not working, but hoping he will be in full time education this year. He currently lives with us.

Buying the property could potentially delay my retirement by a year or so. But we have decent pension pots, and no real debts, so we wont be struggling if we do buy a house.

After what other people do when buying a house for their kids, and if they take out a deed of trust to protect themselves.

I believe you need to be on the title deeds to get a declaration of trust.
Why don't you buy it with him as a joint owner? That way you have a stake in the property? Or just buy it for him in your name?

You didn't really say if you would be buying the property outright though or mortgaged?

mcn99

I would be buying it outright, no mortgage.

I dont want to pay any stamp duty if possible, so i cant be on the deeds.

jennifernil

Lend him the money to buy  it in his name, even if you do not want the money back if all goes well, and put a charge on the property so that you get your money back if he sells it.

I do not think you can both safeguard the money and avoid possible IHT, but would your estate be liable for IHT anyway?

Rosa_Damascena

mcn99 said:

I would be buying it outright, no mortgage.

I dont want to pay any stamp duty if possible, so i cant be on the deeds.

Which is more important to you, the money-saving exercise or helping your son to be independent on a long-term basis? I'm no expert but it sounds like a case of wanting your cake and eating it too. 

In your position I would buy, let it out and then gift it to your son when you are in a position to trust him financially. There's nothing to stop him from being fleeced by a partner but the money will end up his one way or another. It's a question of whether it's sooner or later.

Brie

Firstly - does your son want to have his own place?  Can he afford to maintain it?  Sounds like he can't currently.  And all the bills and energy prices going up??  My mom tried to be generous and it caused me all sorts of aggro.

Using your pension TFLS means you are over 55 and maybe actually nearly 65?  In which case there is (hopefully not but) the chance you will need care support in the coming years.  Should it come to the local council needing to assist then they will be looking at deprivation of assets and a huge gift to your son will be well on their radar.  He may be told he needs to sell the house to give the money back to fund your care, essentially making him homeless.  I know you say you don't want to deal with CGT but having your son as a tenant in a house/flat you own may be a better idea.  If care is required then the rent he might pay (maybe only when care is required?) would make the house an asset providing income rather than merely an asset to be sold. 

Frankly I think you should talk to a very good financial adviser and also a solicitor to get all the wrinkles ironed out. 

steampowered

A much better option will be to gift your son a house deposit - after he is in full time employment, knows where he wants to live and you feel he can trust him.

If you do buy a property, keep it in your own name and let him stay there as a lodger.

I think it would be a really bad idea to put the property in his name:
1) If the property is in his name, he is free to sell it and keep the cash at any time.

2) Putting the property in his name will mean he cannot access first time buyer support, and will need to pay higher rate stamp duty if he buys a property of his own.

3) Lumbering him with property ownership while he is still a student is unfair. The fact is that the best graduate job opportunities are probably not going to be in your town. Owning a property will prevent him from being able to move easily; which could limit the careers he can go into and limit his opportunities. There are many careers where you simply cannot advance unless you spend a few years in a major city (sometimes London) - graduate schemes for big companies are usually based in the head office.

canaldumidi

Some dubious looking advice above...

* if you buy it in your name and he lives there, he won't be a lodger. (you are not a resident landlord)

* if you buy it in your name and he lives there, if he pays you anything be it £1.00 or even payment in kind (eg DIY renovations) he'll be a tenant and you'll be a landlord. There's a host of legal requirements, tax etc etc

* if you buy it in your name it will be your 2nd property (I assume) so 2nd property additional SDLT will apply

* if you gift him the money to buy it himself, the 7 year IHT rule will apply to the gift, and you'll have no security over the money. Either he, or a partner, could do as he/they wished.

* if you lend him the money, and he buys in his name, you could place a Charge on the property (just like a bank does with a mortgage loan), supported by a Deed specifying when/how the loan is to be repaid. The property could not be sold without the Charge being removed (repaid)

* if he buys in his name, he can use his current FTB status but will then lose it if he wants to buy again elswhere later

* your will(s) could take account of what you want to happen of you die

I suggest a discussion with a solicitor specialising in family, tax and/or wills/probate law

mcn99

Definately not going to put it in my name, the stamp duty makes it unfeasible.

I was going to do a zero intrest loan, any gains if house sold would be his.

For the first few years, i will be paying all the bills, until he gets a job, thats part of the deal with him. Otherwise the property will be sold, and money paid back

I am planning on talking to a solicitor next month, and see what they suggest, that would protect both parties.

As im still under 60, i dont believe deprivation of assets is a serious issue.