Buying son a place to live. Advices please.
Discussion
Want to buy our student 19 year old a flat/house for him to live in, and add a tenant, to give him some cash and independence. Estimated pp £135-160k. Cash purchase, no mortgage.
Can't get head around a few issues.
Ownership - should this be in our (parents) names solely, to prevent him doing something stupid (e.g. secured loans) ? We have offshore trust for some business assets, and pondering whether this entity should buy the property....but just seems to add a layer of costs and complexity, without any visible benefits in short-long term ?
Would he be able to easily get bills etc all in his name, so effectively he is 'tenant' although no rent will actually be paid ? Should he be a AST / Tenant, to enable us to evict, if bills not paid, etc....
Seems like right thing to do for many reasons....but can't think thru the lifecycle issues in future.
Thanks. BA
Can't get head around a few issues.
Ownership - should this be in our (parents) names solely, to prevent him doing something stupid (e.g. secured loans) ? We have offshore trust for some business assets, and pondering whether this entity should buy the property....but just seems to add a layer of costs and complexity, without any visible benefits in short-long term ?
Would he be able to easily get bills etc all in his name, so effectively he is 'tenant' although no rent will actually be paid ? Should he be a AST / Tenant, to enable us to evict, if bills not paid, etc....
Seems like right thing to do for many reasons....but can't think thru the lifecycle issues in future.
Thanks. BA
big ant said:
Want to buy our student 19 year old a flat/house for him to live in, and add a tenant, to give him some cash and independence. Estimated pp £135-160k. Cash purchase, no mortgage.
Can't get head around a few issues.
Ownership - should this be in our (parents) names solely, to prevent him doing something stupid (e.g. secured loans) ? We have offshore trust for some business assets, and pondering whether this entity should buy the property....but just seems to add a layer of costs and complexity, without any visible benefits in short-long term ?
Would he be able to easily get bills etc all in his name, so effectively he is 'tenant' although no rent will actually be paid ? Should he be a AST / Tenant, to enable us to evict, if bills not paid, etc....
Seems like right thing to do for many reasons....but can't think thru the lifecycle issues in future.
Thanks. BA
Depends on your health, finances, age etc. etc.. I myself looked at both trusts, offshore etc. etc., i have over the last 4 years given each of my 3 children 300k each, with my son purchasing a home in joint names with his partner.Can't get head around a few issues.
Ownership - should this be in our (parents) names solely, to prevent him doing something stupid (e.g. secured loans) ? We have offshore trust for some business assets, and pondering whether this entity should buy the property....but just seems to add a layer of costs and complexity, without any visible benefits in short-long term ?
Would he be able to easily get bills etc all in his name, so effectively he is 'tenant' although no rent will actually be paid ? Should he be a AST / Tenant, to enable us to evict, if bills not paid, etc....
Seems like right thing to do for many reasons....but can't think thru the lifecycle issues in future.
Thanks. BA
I have enough trust in my children to let them have any monies they require now, and to enjoy the same whilst i am alive.
As a landlord, i find it quite sad that two of my own tenants, have fathers that are also landlords, one landlord considerably wealthy, yet both fathers/landlords don't have the trust to support their own children.
Any tenancy taken out would be an Assured Shothold Tenancy Agreement(hereafter AST), the minimum fixed term
period being 6 months, a Deposit is not required, although the same needs to be clearly stated in the AST.
When i was at Uni this is exactley what a friends parents did. Bought a big house let their son stay there rent free and sub let all the other rooms out to other students. It was a all rental so there where no bills and he "the son" was there to keep an eye on the utility useage etc
Yes there where parties and yes things got broken but on the whole they made money and the property appreciated in value.
Re the offshore trust i would say good move as unless your son is going to live there long term then you will come to sell and therefore be subject to CGT etc
Only thing to check dependent on your setup is are beneficiaries and relatives allowed to benefit from the trust ie live rent free or do you need to be seen to be paying a commercial rent.
I would say this is a good way to give your son financial freedom ie manage the rental, bills, council tax etc etc but still retain control overall. At the end of the day he is still 19 and has years in which to earn your trust and then potentially more freedom??
Yes there where parties and yes things got broken but on the whole they made money and the property appreciated in value.
Re the offshore trust i would say good move as unless your son is going to live there long term then you will come to sell and therefore be subject to CGT etc
Only thing to check dependent on your setup is are beneficiaries and relatives allowed to benefit from the trust ie live rent free or do you need to be seen to be paying a commercial rent.
I would say this is a good way to give your son financial freedom ie manage the rental, bills, council tax etc etc but still retain control overall. At the end of the day he is still 19 and has years in which to earn your trust and then potentially more freedom??
Not looking to adopt per-chance Mr BA? 
I'd definitely make sure the property stays in your sole names, just incase...
I'd also make your son and subsequent tenants sign an AST and make sure your son is aware he is liable for any damage etc himself.
And finally, when taking on new tenants, make sure that all the necessary checks are done before hand. Your son could well fill it full of friends who may be inclined to take advantage of your generosity if they know the circumstances...
Best of luck.
I'd definitely make sure the property stays in your sole names, just incase...
I'd also make your son and subsequent tenants sign an AST and make sure your son is aware he is liable for any damage etc himself.
And finally, when taking on new tenants, make sure that all the necessary checks are done before hand. Your son could well fill it full of friends who may be inclined to take advantage of your generosity if they know the circumstances...
Best of luck.
big ant said:
HOOFY, if I recalled the last 12-18 mths, after 10 years of expensive schools....would put you all off kids !
Oh dear! In that case, a rent-free place to live isn't a bad deal for him! As someone suggested above, he can manage the letting of the other room. It might teach him a bit about business.If you can afford it then sounds like a good idea, i'd do it in his name if you can (unless you really feel he might do something stupid). Personally I would want to give him some responsibility to go with it...maybe a small mortgage which you pay until he graduates then make it clear that it's up to him. This doesn't make sense it strict financial terms, but will teach him some responsibility in the longer term.
purplepolarbear said:
Think about the following if you gift it to him.
1) If he were to get married and this not to work out he might end up losing half of it.
Against this
2) If you die within 7 years, he might have to pay inheritance tax.
And then again he might turn out to be just like his father, a chip off the old block, collecting and investing the rental income in an additional property, whilst surviving the 7 years. The same leaving the father with a broad smile, at last realising that the monies spent on education, turned out to be a sound investment.1) If he were to get married and this not to work out he might end up losing half of it.
Against this
2) If you die within 7 years, he might have to pay inheritance tax.
Hi
I have lent/given my son £150k towards his house he is very sensible so no worries there the only problem is if he marries and then divorces so we have written up a loan agreement with interest added at 2.5%pa this obviously is forgotten about however if neccasary would be classed as adebt that my son has.
hth
keith
I have lent/given my son £150k towards his house he is very sensible so no worries there the only problem is if he marries and then divorces so we have written up a loan agreement with interest added at 2.5%pa this obviously is forgotten about however if neccasary would be classed as adebt that my son has.
hth
keith
keith52 said:
Hi
I have lent/given my son £150k towards his house he is very sensible so no worries there the only problem is if he marries and then divorces so we have written up a loan agreement with interest added at 2.5%pa this obviously is forgotten about however if neccasary would be classed as adebt that my son has.
hth
keith
That's quite a clever idea, would it really stand up if push came to shove in court?I have lent/given my son £150k towards his house he is very sensible so no worries there the only problem is if he marries and then divorces so we have written up a loan agreement with interest added at 2.5%pa this obviously is forgotten about however if neccasary would be classed as adebt that my son has.
hth
keith
Inkyfingers said:
That's quite a clever idea, would it really stand up if push came to shove in court?
Nope, for one of two reasons.1) it is between family, therefor a domsetic agreement. The court would see it as such and not a contract.
Or
2) You do not have a comsumer credit licence, therefor are committing a criminal offence by lending to someone.
If you argue your way out of the first then the second would come in to force.
Also if there is no repayment tem within the contract the court would see right through it (which i guess by the lent/given bit). It would be torn to bits by any half compitent lawyer.
If your taking a risk with this much money get propper advice...
Edited by PaulMoor on Wednesday 28th December 19:48
Edited by PaulMoor on Wednesday 28th December 19:49
Slightly off tangent, but perhaps a consideration is that gifting or giving someone quite a bit of money can lead to moral hazard and become counter-productive.
That person may not give any value to the gift and treat it as a right etc.
Something to consider, but in my experience people who are spoilt turn out the worse for it.
That person may not give any value to the gift and treat it as a right etc.
Something to consider, but in my experience people who are spoilt turn out the worse for it.
ringram said:
Slightly off tangent, but perhaps a consideration is that gifting or giving someone quite a bit of money can lead to moral hazard and become counter-productive.
That person may not give any value to the gift and treat it as a right etc.
Something to consider, but in my experience people who are spoilt turn out the worse for it.
you beat me to it. I was going to say the same. My sister asked me this question regards my niece i.e. her daughter going to university. I know her well. Her attitude is always to do the least possible and to find the easiest solution. If my sister had put a property in her daughter's name, she would not have the motivation to study. She would always feel that she didn't need to because she has sufficient financial security without needing an education.That person may not give any value to the gift and treat it as a right etc.
Something to consider, but in my experience people who are spoilt turn out the worse for it.
So it's really down to how responsible and mature that 19 year old student is.
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