Buying a second home (cash) for daughter

ratsmoneystuff

Looking for some advice please.    We would like to buy a property (£125,000) in cash for our grown up daughter (& young grandchild) to move into. Our own home (worth around £450,000) is mortgage free, We can afford to do this from savings.  Can we do this?   Would it be better to buy it in our names and just let her live in it (we have no intention of charging her rent).  Or would it be better to buy it in her name? (is that even possible?). What are the pitfalls of either of those alternatives  Sorry for the daft questions, but I've just not much of an idea of what I need to know or ought to be thinking about! Thanks for reading this far! 

user1977

Why would it not be possible? Nobody is going to stop you.

You can give her £125k and she can buy a property with it. Or you can buy a property in your own names and let her live in it. The latter means second home SDLT (or equivalent) surcharge to pay plus potential capital gains tax liability. And it remains part of your estate for Inheritance Tax purposes.

p00hsticks

if you are confident that you aren't going to need the money yourself in later life, and aren't likely to be trying to claim means tested benefits or local authority funded care (in which case the 'deprivation of benefits' rules would probably apply), then it would probably be most sensible to give your daughter the money to buy the house in her name. That way my understanding is that you'd both  avoid having to pay the 3% Stamp Duty Land Tax surcharge for a second home on the purchase and avoid any future Capital Gains Tax liability on any increase in the value of the property when it was sold.

propertyrental

You can either
* lend her the money, with a documented agreement of how/when the loan will be repaid. And what would happen in various scenarios. She buys the property in her name. Optionally you could place a Charge on the property just as a mortgage lender would
* give her the money. She buys the property in her name. Provided you live 7 years, the gift would fall outside your estate for Inheritance Tax purposes
* you buy the property in your name, and pay 2nd property 3% additional SDLT, and allow her to live there, either as a rent paying tenant, or free as a licencee. If/when you sell, you'll have Capital Gains Tax to pay as it's not your main residence

gwynlas

Remember if she enters a relationship that leads to a legal union her partner could claim 50% if they break up whoever made the intial purchase.

Keep_pedalling

Or a 4th option gift her a substantial deposit so she raise the rest herself through a mortgage. 

hazyjo

Too many unknowns for me to give a clear answer. If there's any risk of your daughter having significant debt (there may be a back story as to why you're buying her a home, or it may just be a generous gift), or bear in mind she may marry in the future and risk losing half, I'd keep it in your name. If they're not risks or concerns, buy in her name.

ratsmoneystuff

Thanks so much to all of you for coming back with your views and information.  For info - she has no debts and would live on her own savings until she is in a position to find employment (once grandchild is in school). We're confident about our own financial position -after the £125k, would still have around £300k savings. No one can best guess the 7 year survival risk I suppose, but OH is 64 and currently hail and hearty.   

ThisIsWeird

That's very kind and generous, Rats.

How certain are you and your OH that you can sever emotional ties to this gift should it become necessary? Eg, in the always possible event that your daughter meets and wants to marry a person you have doubts about?

diystarter7

Hi

From what you have said.

Personally, I'd buy it ourselves as a married couple are allowed around a million in tax-free IHT. (assuming you don't have hundreds of thousands more saved)  Then I would keep it in good repair, insurance etc which some may neglect.

The easier route, gift her the money on the agreed basis of buying this flat. If she falls indebt//sued etc, someone could make a claim on that.

We have gifted money etc but only because our kids work, have their own places as IMHO, you may wnat to help your kids but not make them lazy or run before they can walks (not referring to your kid here just saying)

You could buy the flat and then pay the additional stamp (2nd property) as second property and then gift it later down the road when she does find work as it may be an incentive to work?

Sorry, just read your second post - GIVE  your daughter then money for the flat, gift it to her and save the 3% stamp of additonal property whatever it is and good luck to her and you
Thanks

macman

If you buy the property and allow her to live in it rent free, then no tenancy is created, and she has no security whatsover: she is just a guest. In the event of your sudden death, then unless you have left her the property, she may find herself homeless.
If she pays rent in some form, then you have become a professional LL, with all the many statutory burdens that imposes on you.