For example, it is natural for parents to want to provide financial help to their children in order to buy a property. However, the question then arises as to how your interest is protected, if the funds are not to be treated as a gift or, in the case of a purchase by a couple, to be treated as a gift only to one of them.
The impact on Stamp Duty
One might assume that naming the donor of the gift as a registered co-owner would be a good solution but this can have serious tax implications, which are now exacerbated by the higher rate of Stamp Duty Land Tax (SDLT) that applies to those who are named owners of more than one property. Some might attempt to avoid this problem by rearranging the ownership of their existing assets, but SDLT will take into account not only property registered in an individual’s name, but that registered in the name of any spouse or civil partner. Even setting up a trust arrangement, whereby the property is held by the named owners but an interest is reserved in favour of the donor of the gift, is not a clear cut solution. Some suggest registering a charge against a property in the same way that any mortgage loan would be secured, but if the property is already subject to a mortgage, this would require that lender’s consent and then there is the question of how to record the agreed terms. When will repayment be made? Will it be by instalments or a single lump sum? Will interest be charged? What happens if something goes wrong?
This example illustrates how easily a simple idea becomes complicated and clients can quickly become entangled in a web of unforeseen consequences, but there will be a suitable answer for almost every situation.
Therefore it is vitally important to instruct a high quality, multi-disciplined legal practice to ensure you receive the full range of specialist advice that you need to achieve the best possible outcome for you as well as your children.