Gifting money to kids ?

[KennyN]

I am sure there are a few on here that have been in a similar situation regarding their offspring (sponges)

Daughter (28) is looking at getting on the property ladder in London (i know ) , as she has been living there for the last six years and figures that she want to put proper roots down so in order for her to do so a 10% deposit is required for the mortgage as a 100% mortgage would be a bit of a stretch for her and her partner.

So enter the ATM that used to be called mum and dad to fill the deposit void.

If we "gift" her the money for the deposit (more than the allowable £3k) is she liable for any tax implications apart from the seven year rule should we check out before then ?

The bible that is Google and the HMRC states that gifts are not taxable (although any income on interest will be) which i find strange as moving large(ish) sums of money around and into property without implications seems to be a money launders dream.

TIA - K

 

[clk320x]

Parents gifting to kids is fine (why wouldn’t it be?) you might need to sign a declaration confirming it’s a gift and you’re not expecting it back…

 

[ALFAitalia]

Just be sure to live more than 7 years after the date you give it to her.....otherwise it will still be part of your estate and part of the inheritance tax threshold..........other than that its all good. Hopefully you do plan to live longer than that!!! Just make sure you get a good interest rate from her and regular monthly payments when she pays it back????!!! NO???....just me being tight then!! Just wish my parents were ever so generous!!

 

[baxlin]

Re Inheritance Tax Annual exemption, you can each give £3000, and if you’ve not used last tax year’s, you can ‘catch up’. So that’s £12k exempt. You could each give £250 to her partner. For larger amounts, which would of be exempt, again split them between you, as it halves the 7-year risk!

 

[T5R+]

Re Inheritance Tax Annual exemption, you can each give £3000, and if you’ve not used last tax year’s, you can ‘catch up’. So that’s £12k exempt. You could each give £250 to her partner. For larger amounts, which would of be exempt, again split them between you, as it halves the 7-year risk!

Had wondered about that £3k/parent..............assume this is where the £12K comes from (ie £3k/parent and utilising previous year "allowance" ie 3 x 2 x 2).

Assume that I know the answer the answer..............if had 3 children, could you give each £12K........fear the answer is £4K/each?

OP - London is a superb experience for "younger folk". Good on her.

 

[ioweddie]

Can't you just pay the deposit for her. so its just another bill for you like buying a car etc

 

[MikeInWimbledon]

Can't you just pay the deposit for her. so its just another bill for you like buying a car etc

it will be picked up by the AML documentation and might give the lawyer “pause.” But easy to explain.

Personally I’d prefer a cleaner trail.

Don’t forget to budget for the absurd transaction and set up costs. These can trip up a first time buyer

And work out your contingency plan in case she splits from her partner who will own half the property. An unkind thought perhaps, but it can happen

 

[Will]

Can’t she sell that antique (similar to the one you recently bought?) but gifted to her 7 years ago

 

[pmcgsmurf]

Quite normal, have done in past up here and just a declaration stating it's a gift and does not require repaying to keep lawyer/lender happy.

 

[KennyN]

Thanks for the replies guys, makes things a bit clearer.

At 57 i would like to think we should out live the seven year clause , if we dont then there will be enough in the estate to pay any inheritance tax shortfalls.

We will make sure that we get the legalities sorted regarding the money ratio should they separate, which hopefully wont happen.

FWIW i think she is off her head buying in London as the prices are absolutely nuts for what you are getting , plus in her price range it will be a "doer upper" and neither her or her boyfriend have the first clue about DIY meaning being left at the mercy of trades persons at Londinium rates as DIY dad is 440 miles away and still working full time.

As she can mostly work from home i dont see why moving outside the M25 to a new build and commuting in two days a week isn`t an option , that way they may actually get a bit of bang for their buck , but what do i know ??

Thanks again - K

 

[MikeInWimbledon]

Thanks for the replies guys, makes things a bit clearer.

At 57 i would like to think we should out live the seven year clause , if we dont then there will be enough in the estate to pay any inheritance tax shortfalls.

We will make sure that we get the legalities sorted regarding the money ratio should they separate, which hopefully wont happen.

FWIW i think she is off her head buying in London as the prices are absolutely nuts for what you are getting , plus in her price range it will be a "doer upper" and neither her or her boyfriend have the first clue about DIY meaning being left at the mercy of trades persons at Londinium rates as DIY dad is 440 miles away and still working full time.

As she can mostly work from home i dont see why moving outside the M25 to a new build and commuting in two days a week isn`t an option , that way they may actually get a bit of bang for their buck , but what do i know ??

Thanks again - K

They all go through this.

Hopefully she's chosen a good area with nice schools for the first child when it comes along, which it will.

Because Dinkies become young parents soon enough. And the network that you make in your twenties and through antenatal locks most into the same area for a couple of decades.

 

[KennyN]

They all go through this.

Hopefully she's chosen a good area with nice schools for the first child when it comes along, which it will.

Because Dinkies become young parents soon enough. And the network that you make in your twenties and through antenatal locks most into the same area for a couple of decades.

No plans for kids ATM, but as you say it probably will happen.

Currently residing in Streatham but putting roots down there wont be in the budget so who knows where they will end up. Trying to explain that its much easier to move on if you are a renter than if you are an owner.

Got to be a house as the leasehold / freehold thing seems to be an issue with a flat down south.

As you say if it is a 20 year plan then - location - location - location is (are) the word(s)

K

 

[MikeInWimbledon]

No plans for kids ATM, but as you say it probably will happen.

Currently residing in Streatham but putting roots down there wont be in the budget so who knows where they will end up. Trying to explain that its much easier to move on if you are a renter than if you are an owner.

Got to be a house as the leasehold / freehold thing seems to be an issue with a flat down south.

As you say if it is a 20 year plan then - location - location - location is (are) the word(s)

My old manor. I started in Tooting Bec “before it became Wandsworth Common.”

Leasehold isn’t really an issue to a Londoner but service charges can be a nightmare.

Suggest that she plugs Anerley or Beckenham into Rightmove. Might not be so easy to access the tube but it is liveable, and you can Uber in and out. But it is still £500k for two beds freehold

 

[AMGeed]

I gifted a £30k house deposit for daughter#1 in 2020.
I had to complete an online form (Nationwide) stating I had no financial interest in the property and the money was a gift, not a loan.
They understand if I snuff it within 7 years of the gift., they are liable to tax on that sum.

 

[Harrythedog]

Just put the money into her account as soon as you can and they may not ask where it came from.

I sold a property under market value to one of my sons as it was all he could afford but I had to pay CGT on the difference between what he paid and the market value. I paid tax on money I didn’t get! tw*ts

 

[baxlin]

If you really want to safeguard against the couple splitting and the partner getting half, consider setting up a trust, with her as beneficiary. You gift the money to the trust, (same gifting rules apply) and let the trust loan her the money. If they do split, she repays the loan (to the trust, not to you) re-borrowing it when the dust settles.

TRIGGER WARNING: this could possibly be a sledge hammer to crack a walnut, and not necessarily cheap or right for everyone, as it has several other aspects to be considered. So definitely take professional advice.

Just make sure you get a good interest rate from her and regular monthly payments when she pays it back????!!! NO???....just me being tight then!! Just wish my parents were ever so generous!!

If she pays it back, it’s not a gift, so I think it would return in full to your estate and be liable to IHT.
Unfortunately, ‘They’ve’ got you all ways…

 

[PXW]

I gifted a £30k house deposit for daughter#1 in 2020.
I had to complete an online form (Nationwide) stating I had no financial interest in the property and the money was a gift, not a loan.
They understand if I snuff it within 7 years of the gift., they are liable to tax on that sum.

Yes, we had to do that for Nationwide too.

IHT is paid by the estate, not the recipient of the gift. All that happens under the seven year rule is that all or part (it’s a sliding scale from years 4-7) is added back to the chargeable estate for IHT purposes. If the recipient of the gift also happens to be the beneficiary of the estate then it’s the same net result but technically the “giftees” don’t have to pay IHT.

 

[NJSS]

I would advise looking at this as part of the wider "estate planning" and get advice from a specialist solicitor.

SWMBO did this years ago via a trust which appears to be working well for all concerned.

In the alternative you could wade through this:-

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but I wouldn't advise it!

NJSS

 

[Bobby Dazzler]

Just put the money into her account as soon as you can and they may not ask where it came from.

This.

Gift it to your daughter in advance and then it becomes savings, for her to do as she wishes. No need to tell the lender if she chooses to use it for the purchase of the house.

 

[NJSS]

Sorry - to clarify:-

I wouldn't advise spending hours reading this:-

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A trust however might well be the answer.