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Parental guidance

When buying property for children, clients must weigh up the IHT benefits of giving funds away and reducing the size of their estate against their desire to protect assets from claims, says Caroline Cook 

20 August 2014

Using the ‘bank of Mum and Dad’ may be the only way to get on to the property ladder for many but there are consequences. As well as considering inheritance and tax issues, clients must also ensure that the investment will be protected from claims, for example in the event of a relationship breakdown or problems with creditors.

Parents investing in property for a child under 18 have to use a trust structure (at least until the child turns 18) as under-18s can’t own property, which is fairly straightforward. However, it’s more complicated when the child is an adult.

An adult child can own property outright or benefit a trust, so parents need to think about which is appropriate. The purchase could be funded through a cash gift or loan and, if a loan, the parents must decide on what terms and whether a charge over the prope...

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