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Where Taxpayers and Advisers Meet

Helping our son buy a property

JOHNRE
Posts:91
Joined:Sat Feb 06, 2016 2:03 pm
Helping our son buy a property

Postby JOHNRE » Tue Feb 27, 2018 1:01 pm

Our son will soon be getting married. In about 3 or 4 years time we would like to use some of the wealth we have grafted for to help him buy a property. Having done some basic research there would appear to be a range of possibilities - outright gift, a loan arrangement, extablishing a trust.......obviously, we want to minimise any potential IHT or CGT.

To give more context, the son would probably have to get a mortgage on top of the £250K we can "give" him. We have no other children or dependants.

Any opinions on suitable ways forward (or links to other information sources) would be gratefully received.

Best wishes.

John

bd6759
Posts:4262
Joined:Sat Feb 01, 2014 3:26 pm

Re: Helping our son buy a property

Postby bd6759 » Tue Feb 27, 2018 6:20 pm

Give him the money. Subject to the 7 year rule, it's no longer yours and no taxes to pay.

A loan means its still yours.

A trust is just a complication, unless you have worries about your future daughter in law.

JOHNRE
Posts:91
Joined:Sat Feb 06, 2016 2:03 pm

Re: Helping our son buy a property

Postby JOHNRE » Tue Feb 27, 2018 8:09 pm

Thanks for the reply, but what if one if us, does, indeed, die within, say, 3 years? I am looking for a solution that will minimise IHT. Do you think there are any advantages to us loaning him the money?

AdamS93
Posts:268
Joined:Tue Sep 26, 2017 6:28 pm

Re: Helping our son buy a property

Postby AdamS93 » Tue Feb 27, 2018 8:57 pm

Thanks for the reply, but what if one if us, does, indeed, die within, say, 3 years? I am looking for a solution that will minimise IHT. Do you think there are any advantages to us loaning him the money?
The best way is to gift the money and 'hang on' for 7 years in my opinion - just make sure the healthier of the two of you gifts the money to your son.

If you loan the money, the loan will be included as an asset in your death estate.

Sorry to be so brutal about death! But that is what IHT is all about.

JOHNRE
Posts:91
Joined:Sat Feb 06, 2016 2:03 pm

Re: Helping our son buy a property

Postby JOHNRE » Tue Feb 27, 2018 9:33 pm

Even if this loan was included in our estate(s), we would still be within the £1m limit that will be in operation once the maximum main residence allowance kicks in in 2 years time.

bd6759
Posts:4262
Joined:Sat Feb 01, 2014 3:26 pm

Re: Helping our son buy a property

Postby bd6759 » Wed Feb 28, 2018 1:37 am

The 7 year rule simply adds the gift back into your estate. If it is below the limit, there will be no IHT to pay.

JOHNRE
Posts:91
Joined:Sat Feb 06, 2016 2:03 pm

Re: Helping our son buy a property

Postby JOHNRE » Fri Mar 02, 2018 4:34 pm

So, if I were to gift my son £300K to buy a property, and I died 2 years later, would he have pay IHT at 40% of the gift or would my executor be able to offset the £300K against my personal £325K IHT allowance?

John

AdamS93
Posts:268
Joined:Tue Sep 26, 2017 6:28 pm

Re: Helping our son buy a property

Postby AdamS93 » Fri Mar 02, 2018 9:10 pm

The later, failed potential exempt transfers (gifts) will use your nil rate band first, any remaining nil rate band will be offset against your death estate.

JOHNRE
Posts:91
Joined:Sat Feb 06, 2016 2:03 pm

Re: Helping our son buy a property

Postby JOHNRE » Fri Mar 02, 2018 10:11 pm

Thank you.


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