What to do ???

Susan1942

A couple of weeks ago I asked the question what I should do with £41,000.  My young grandson 29 hopes to buy a house next year,  Buying a house is difficult for young people as nowadays as they will need a substantial deposit ??  I have no idea how much of a deposit they have or how much any properties they are looking at costs. As I said I don't need or have any purpose for this money and my monthly income is greater than my needs. This would not be to deplete my savings with a view of avoiding ?? future care needs.  I would appreciate your views.  As I have said in my previous post this is one of several investments.  Sue 

Section62

Susan1942 said:

A couple of weeks ago I asked the question what I should do with £41,000.  My young grandson 29 hopes to buy a house next year,  Buying a house is difficult for young people as nowadays as they will need a substantial deposit ??  I have no idea how much of a deposit they have or how much any properties they are looking at costs. As I said I don't need or have any purpose for this money and my monthly income is greater than my needs. This would not be to deplete my savings with a view of avoiding ?? future care needs.  I would appreciate your views.  As I have said in my previous post this is one of several investments.  Sue 

Is he your only grandchild?  Any other sons/daughters without their own children?

Vitor

Gifting money for a deposit can help, but it’s worth knowing how it works from both sides before you commit.

For you, gifts are usually fine as long as they’re genuinely from surplus income or savings and not an attempt to avoid future care fees. There’s no tax when you give the money. For inheritance tax, the gift becomes a “potentially exempt transfer”. If you live seven years after making it there’s no inheritance tax on it. If you were to die within seven years, the value of the gift is simply counted back into your estate pro-rata. For many people this still creates no tax because their estate remains below the inheritance tax thresholds.

The only time local authorities get concerned is when someone gives money away while knowing they’re likely to need state-funded care soon. You’ve said you’re not doing this for that reason, which helps, but it’s still wise to be aware of the rule.

For your grandson, the main point is that lenders want the money to be a genuine gift with no expectation of repayment. They normally ask you to sign a “gifted deposit” letter. The money doesn’t create income tax issues for him.

Before giving any amount, it’s worth making sure he has a clear plan: how much deposit he actually needs, whether the gift would be all or part of it, and whether it leaves you with enough for your own long-term security. A £41,000 gift is significant, even if you feel comfortable.

If you want to go a step further, you can say that some families prefer to hold back some of the money until an actual purchase is agreed, so the gift is tied to a real transaction rather than an abstract intention.

Susan1942

No I have 6 grandchildren aged from 29, 28,  23. 21. 15. and 3.   This grandson is the only one in a settled relationship and both have got good jobs. They are paying £1200 monthly rent.  I have got a son and daughter who are both in their middle 50's.  When way back in the 60's the cost of houses was a lot less so therefore a deposit needed was much less.  They have no idea that I am considering this.  I have got enough money in my current account to give them a half decent amount towards a deposit.  I will be 84 in February so I will in all probability not be around to see the younger grandchildren in this position.  All of them will inherit money when I die but I am thinking about the here and now.  

eskbanker

Entirely up to you, depending on family dynamics, but in your shoes I'd be very keen to treat all grandchildren equally, even if you're unlikely to be around if/when the youngest reaches house-buying age, so any such gift probably ought to be reflected in an adjusted will, so as to treat them even-handedly, i.e. any deposit gift here and now would be treated as an advance of future inheritance.

Susan1942

Thank for your response.  I would not be gifting the £41,000 but just enough to help them with a deposit.  I have got other substantial savings and my own financial needs are more than met by my monthly income.  I might want to help further grandchildren with the same purpose.   I would not just gift the money for any cause but to help them on the housing ladder seems like a good and wise decision.  I have not spoken to them about this I only know that my grandson said they hope to buy a house next year.  They have good jobs and will be able to afford a mortgage.  It is saving for a deposit that I assume is not easy. I am in good health but who knows what the future hold for any of us. 

eskbanker

If your grandson and his other half are in well-paid jobs and hope to buy a house next year, then chances are that they'll already have saved for a deposit, or will at least have factored this into their financial planning, unless it's just a vague aspiration rather than an actual plan?

Having said that, people usually welcome any assistance when looking at getting on the housing ladder, as it's an expensive time of life!

Susan1942

You are right of course and I would want to treat them all equally.  I think that they do intend to buy a house next year and reckon they will be saving towards this.  My grandson has always been very good with his money unlike his sister who is the total opposite.  It would be my intention to make an adjustment so that my other grandchildren would be treated equally.  When my husband died my son and daughter inherited some money from their father  My daughter who was married with one child bought a bigger house.  My son on the other hand was 26 had debts from his university days but he frittered the money away in a very short time.  He is still not good with money and has got 4 daughters.  I love them all equally but to be able to help my grandson now would make me very happy.  I have supported all of them whilst they were at university.  The 23 and 21 year old are still studying and I do give them a monthly allowance. 

Brie

Just to be clear - you are 84 and currently in good health (& long may that continue) with oodles of money so do not think you will ever be needing help from your local authority to pay any care costs (at home or elsewhere).  I would suggest you calculate what a decent care home costs in your area and cost that out over say 5 - 10 years.  Would you still have enough?  A cheap place in our area is in excess of £1k a week so you would be looking at £60k minimum a year for something quite basic.  If your income and savings would cover the £600k+ for 10 years then there's nothing to worry about.  

Sorry if this seems intrusive - you seem to have thought a lot of this through and perhaps don't need to be told about anything.  It's just I've been at the fighting edge with the LA with regards to my MiL and know how mean frugal they can be and that might potentially have them looking to reclaim ££ from your grandson if they thought you had deprived yourself of assets.  If you have a million in the bank and are sitting on a piece of top London real estate then obviously it's unlikely to be an issue.

Susan1942

I didn't say that I  have oodles of money but I have got more than enough for my current needs.  I know all too well how much care homes cost.  I can't live my life being scared to spend based on a fear of needing long term care in the future.  What I do have at the moment is £41,000 sitting in a bond which only increased by £87 in 12 months.  I know that the 7 year rule exists in the event of my death.   I am sorry that you are having a major struggle with the LA in relation to your MIL care needs. 

singhini

Sounds a bit odd £41k (easier to look at it as £40k IMHO)
Why don't you structure this £40,000 in a way that is fair to the grandchild receiving the £40,000, while also keeping things fair between all your future beneficiaries i.e. change your will so the other beneficiaries will get slightly more in inheritance to offset the £40k (i'm going to assume you have 8 beneficiaries in your will, 6 grandchildren and your 2 children).
So, in short -----> give him the £40k for a deposit -----> add a charge against the property -----> update your will to reflect the £40k

(1) You could give the £40,000 as a loan (not gift) and put a charge against the property (that way the grandchild has to use it for a deposit and can't drink the money away). A solicitor will put a legal charge against the property with Land Registry. The charge can say things like repayable on sale of the house, or repayable on your death, or repayable at any date you set. (This protects the money so it isn’t lost if your grandchild broke up with a partner, sold the property, or got into financial trouble).

(2) Change your will and add a clause such as “I have advanced £40,000 to my grandchild [Name] as a lifetime loan. For the purposes of equalising my estate, £40,000 shall be deducted from their share of my estate.”

So if your estate was worth £365,000 but they already got £40,000. Then the remaining £325,000 is split
£45,625 each for 7 people 
£5,625 for the other who received £40,000 already