The bank of Mum & Dad
It has been reported that two-thirds of first-time buyers would be unable to afford a home without help. Typically, they buy at aged 30 and put down a 17% deposit (on average £26,000). So, depending on how many children you have, that could amount to an awful lot of money being passed down to your children in the form of property.
Whilst gifting to your children during your lifetime can be an excellent way to reduce your inheritance tax liability (provided you live for seven years after the gift), it would be reckless to do so without exploring the protection that could be put in place for your money.
A Beneficiary Protection Trust is one of the most efficient ways of protecting assets passed to your children, either during your lifetime or on your death. Although you still have to abide by the seven-year rule for gifting (so no IHT benefit until further through the generations), it provides invaluable protection against such things as divorce, bankruptcy or any other claims on your children’s estate.
Whilst you may not see such things as divorce or bankruptcy – or indeed any claim against your children – on the horizon, it does not mean that these events may not occur in the future. By putting such protection in place now, you, as well as your children, are saved any future battles with ex-partners or banks over the gifts you may make to help with first-time house purchases. In the eyes of the law, once money has been given as an outright gift to your children, you have no further claim to it and so it could easily be lost in a number of future circumstances.
If you would like further information about Beneficiary Protection Trusts, please call the office and we will be more than happy to help.