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The Banks of Mum & Dad

Parents are parting with thousands of pounds to help their children get on the property ladder, but they can’t afford to lend as much as they used to. The average parental contribution for home buyers this year will be £18,000, down 17% from last year’s £21,600, according to Legal & General (L&G). The drop shows that parents are “feeling the pinch”, the firm says. However, more than one in four buyers are still expected to receive financial help from friends or family. In total, financial services firm L&G said 27% of home buyers would get assistance – up from 25% last year. Despite the smaller sums being loaned, L&G said the so-called Bank of Mum and Dad was still “a prime mover” in the UK housing market. (Read the full article here at BBC News Business).

Redwood Financial View: The ability to be able to help your friends and family is a wonderful and generous gift to be able to bestow. There are potential risks associated with undertaking this type of support though and there are ‘safe’ and ‘unsafe’ ways to provide this cash to your loved ones. Simply gifting money could result in a hefty and unexpected Inheritance Tax bill for the recipients after you have died. Placing the cash into a protective Trust and issuing the gift as a loan to the recipients can be the difference between them paying £0 Inheritance Tax and 40% tax! It can also protect the gift from future relationship breakdowns. So if your children or grandchildren go through a divorce or separation, this deposit stays with them.

A Trust Plan that takes into account all of your individual circumstances is something we help people achieve every day, so if you need help then let us know. We’d be delighted to help you!