The legal considerations when buying property for your child

by Daniel Jones

Investing in a home for your child can be an appealing option, as it allows you to safeguard their future, giving them somewhere to live for as long as they wish.

It's no wonder that many parents with the funds to do so go through with a property purchase on behalf of their offspring, but it's worth remembering that there are a number of legal issues to consider first.

1. How old is your child?

A child cannot legally own a property until they are 18. So if you're hoping to buy for a youngster who has yet to reach this milestone, the home will have to be bought in your name.

2. Are you happy to buy a property entirely in your child's name?

If not, you can look into joint ownership as this will allow you to retain some control. But if you do this, the house will then be considered to be your second home, raising a whole host of capital gains tax and inheritance tax issues. Knowing how to avoid tax burdens should be a priority when buying a home.

3. When do you want to hand control of the property to your child?

It's important to work out whether you're happy to hand control over as soon as a purchase is completed or whether you want to wait for a time when you feel more comfortable doing so, either by selling up or gifting your share to your child in your will.

4. Is your son or daughter a student?

Many parents choose to buy a home for their son or daughter before they head to university, giving them student accommodation during their years in higher education and relieving them of the burden of paying rent. But as a student is unlikely to have much income, you must remember that you're likely to have to act as a guarantor on any mortgage that is required.

5. Do you want to set up a trust?

There are options beyond simply handing over a home worth hundreds of thousands of pounds outright. You can look into setting up a trust, although it should be noted that these can be complicated so seeking advice from a legal firm is advised.

6. Do you want to get other tenants?

You could even act as a landlord by buying a property in your child's name and encouraging them to find tenants for additional bedrooms, which will ensure a steady return on the investment.

7. How are you affording the property purchase?

While a few parents will be lucky enough to have huge sums of money lying around in bank accounts that can be used to complete a property purchase, many of you will have to raise the funds if you're to buy your child a place to live. It's therefore imperative that you know how best to secure the required finance - whether this is through a mortgage or not. Think long and hard about your repayment obligations and whether your offspring can afford it in the long run.

With the UK property market increasingly competitive and expensive, being able to provide your child with a home should set them up for life. But it's not something to be rushed or done on a whim, as the consequences and responsibilities are numerous.ADNFCR-1645-ID-801673507-ADNFCR

More information 

To find out more on this subject, Lawpack's guide Property Investment for your Children can help. 

Property developer Catherine Dawson provides expert advice and tips on:

  • How you can use the investment to avoid tax
  • How to raise capital for the purchase
  • The best way to leave your investment property to your children 
  • Plus much, much more.

Published on: December 17, 2013

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