Helping our kids with a mortgage deposit.

[munmun]

Originally Posted by chrisxal

We gave our son & DIL a sizeable chunk of money and never considered the 'what if's' of divorce, we gave it as a gift so hadn't considered drawing up a contract or adding any restrictions, however their solicitor said as it was 'unearned income' they would have to pay tax on it, they would have had to pay £15k to the taxman, which meant they wouldn't have enough money to buy the house, which was crazy, so we agreed to draw up a loan agreement just to avoid having them to pay tax on the gift, it was a nonsense as there was no way they could afford to repay us on top of their mortgage repayments and we made it clear to them we did not expect them to pay us back, we just had to play the game.

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This is also rubbish, there is no tax to pay on any sized gift. It is not income.
If the solicitor says this you need a new solicitor. They were just out to earn more money setting up an agreement.
Provided you live seven years post your gift there is no tax payable. If you die within seven years then IHT is payable but the gift is proratered according to how long you have lived.

[parisdisneyfan]

Originally Posted by munmun

This is also rubbish, there is no tax to pay on any sized gift. It is not income.
If the solicitor says this you need a new solicitor. They were just out to earn more money setting up an agreement.
Provided you live seven years post your gift there is no tax payable. If you die within seven years then IHT is mayable but the gift is proratered according to how long you have lived.

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And it has to go over the iht limit in the first place! My dad gave us some money, didn’t give it “properly” according to the solicitor but even when we added it back to his estate it didn’t take us anywhere near the limit (£700k I believe) so it was all a moot point! Also isn’t it just the interest on unearned income? Lottery wins, premium bonds and inheritance are unearned yet we don’t have to declare them - well inheritance we didn’t but did have to declare the interest it earned! Never been lucky enough to find out about the other 2!

[wilma-bride]

When my husband and I bought our fist house, he put the entire deposit down. We had a clause written up by a solicitor stating that, if we split, he would get back what he put in before the rest was split 50/50. We've since bought another house and didn't bother with that again as we were married and had a kiddie by then.

[FlorayG]

OP my first thought on reading your post was "They haven't even bought a house yet and he's worrying about them splitting up?"

Anyway...if you're thinking of giving, say, £10,000 or less then that's going to be a minimal percentage of the value of the property if they should split up and the £5,000-ish lost will be insignificant (maybe not to you, but you already lost it IYKWIM). If you're thinking of giving more like £40,000+ then you're buying the house 3 ways and should be on the mortgage

Just some thoughts to consider

[DisneyDaffodil]

We have just loaned our son and his fiancée their small 5% deposit for buying their first home. We would have loved to have gifted it, but with 3 children who we treat equally, we just couldn’t afford to give away three times the deposit out of our savings.

However we have declared it as a gift as it would have affected them getting a mortgage with the loan declared. They will pay us back interest free over the next few years and we trust them to do so. They have been together since they were 15, so 15 years now, and I love his fiancée as if she was one of our own. I believe they will repay us easily within five years, and although nothing is certain, we feel their relationship will last even longer than this. If not, then we will consider what will happen regarding the loan.

Even though we ‘gifted’ the money, we had to supply a bank statement to prove we had the money in our account previously to the mortgage lender. We took the cash from a small account with just a little over the deposit amount in it to do this so we did not have all our capital declared (don’t want the son seeing everything 😂 ).

We will also help them buy furniture etc (as a gift) and help with painting and diy. They are very appreciative of the help and it’s nice to see them so excited about their own home.

[Guest]

My grandparents gifted my deposit. I'm engaged and have been with my partner 5 years.

But my will states that if we were unmarried and I were to pass away, my deposit would return to them, or my father.

I know it's morbid but my family have saved all of their lives for their money, I want it to go back to them. I'm not planning on ever splitting from my partner, but you never know. If we were however married, then my partner gets the money.

It cost me £300 for a deed of trust and a little extra for the will, money well spent.

[Guest]

I understand where you are coming from MickeyHouse.
My friend lost her father and received a substantial.inheritance that her very frugal.father had scrimped and saved to be able to pass down to her. She was very touched. She was also very sad that he had gone without his whole life so he could leave it to her and she hadn't realised what he was doing.

She in turn gave the money to her son who was setting up home so he could buy a flat in London, close to where he worked which would otherwise be impossible. He married and despite best intentions divorced within 4 years. The flat sold and the property split. The ex-wife departed with £80k of what she perceived as her father's money. She was devastated. Her son however didn't see it as a problem. She remains devastated as she feels she let her father down. The son for his part does not now have enough left to be able to afford a flat in London and has now had to leave his London job as he cannot afford the rent any more. He is now struggling for a deposit in Cardiff as he used so much of his capital in London rent. She cannot help him any more. An extreme situation potentially but still very sad and sensitive issue all round.

I would be interested to hear if you find a solution which resolves your dilemma.

I would like to be able help mine however I can. But think I am in the support and assurance camp. It's not that I am second guessing my children's relationship, perhaps it's just having watched my friend go through this I am more cautious.

[mickey house]

Originally Posted by FamilyGWales

I understand where you are coming from MickeyHouse.
My friend lost her father and received a substantial.inheritance that her very frugal.father had scrimped and saved to be able to pass down to her. She was very touched. She was also very sad that he had gone without his whole life so he could leave it to her and she hadn't realised what he was doing.

She in turn gave the money to her son who was setting up home so he could buy a flat in London, close to where he worked which would otherwise be impossible. He married and despite best intentions divorced within 4 years. The flat sold and the property split. The ex-wife departed with £80k of what she perceived as her father's money. She was devastated. Her son however didn't see it as a problem. She remains devastated as she feels she let her father down. The son for his part does not now have enough left to be able to afford a flat in London and has now had to leave his London job as he cannot afford the rent any more. He is now struggling for a deposit in Cardiff as he used so much of his capital in London rent. She cannot help him any more. An extreme situation potentially but still very sad and sensitive issue all round.

I would be interested to hear if you find a solution which resolves your dilemma.

I would like to be able help mine however I can. But think I am in the support and assurance camp. It's not that I am second guessing my children's relationship, perhaps it's just having watched my friend go through this I am more cautious.

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That is very unfortunate to hear, but this isn't the first time I've heard something similar hence why I want to have some protection for my son.

There are other things to consider such as my son has saved hard and has a big deposit to put down on a property, and it's likely his partner will have zero to add to it. I don't mean that a moan, but should they part he would potentially lose half of that, so I don't want him also losing half of the chunk I would give/loan him.

I also know of a nice couple who helped their daughter buy a home and her husband's parents were wealthy, but as mean as they come and they felt it was good to let their daughter find her own way in life (a good excuse not to help her financially), and move forward a few years and they parted with the husband getting a big chunk of the nice parents money and none of his wealthy parents.