Giving away assets – is that a good idea?
Many clients are worried that their children will never be able to afford a house. The answer many come up with is that they become the bank of Mum & Dad. Whilst you may be able to afford to help your children, there are various issues that have to be considered before the money changes hands!
• Making a gift can have an impact on your Capital Gains Tax position (often termed as gift tax!)
• A large gift could be a Potentially Exempt Transfer for Inheritance Tax!
• In some cases the gift could even be subject to Income Tax (under the Pre-owned Asset Regime).
• The tax position will be different depending on the assets you are going to give away.
Please be aware that cash will be treated differently from physical assets.
And these are just the potential taxation issues that must be considered!
Making a gift is different from making a loan to a child, which will have impacts on not only your personal tax position. But will have a direct impact on your Will provision. If the money you are making available to a child is to be a loan and NOT a gift the rules again will be different.
So if you are seriously thinking of being the Bank of Mum and Dad, call me first to ensure that your gift does not have any unforeseen complications.