In the current difficult economic times and with the unwillingness of most banks and buildings societies to loan much more than 75% of a property’s value, many parents are lending or giving money to their children to use as a deposit so that they can buy a decent home while prices are relatively low.
These arrangements can be fraught with difficulties as advice is rarely taken and consequences are not thought through. Whether an outright gift, as an interest free loan or as an investment, there can be significant tax implications.
If the money is being lent then this should be recorded in a formal document to prevent later confusion should circumstances change. It needs to contain details about the basis on which the loan has been made, what will happen to the money if one of the parties dies, or the child or spouse or partner split up, or if the parent needs the money back.
There can also be implications if two or more buyers are entering a purchase with different amounts of money. There are often disagreements as to what proportion of a property is owned by each partner. It is much cheaper and less traumatic to sort it out at the outset with a legally valid document rather than waiting and ending up in Court.
Beviss & Beckingsale have property and tax experts who can help you with these, and other, issues and so if you would like to speak to us then please contact Frances Griffiths on 01460 269700 or by email on firstname.lastname@example.org or ask at any of our offices.