Every year, one of the UK’s largest lenders - the Bank of Mum and Dad
(BOMAD) gifts money for major life events, from first property purchases to university fees. However, a new nationwide study has now discovered that over three quarters of all parents aged 55 are concerned about making financial mistakes when it comes to gifting.
If you’re looking for some gifting guidance, Dean Mirfin has developed some top tips for parents considering loaning or gifting to their children and grandchildren:
- Talk about exactly what you can afford and what is fair. It’s vital to consider your own financial future before thinking about gifting or loaning money. Your retirement income, potential cost of care and house refurbishments are the sorts of things to factor in. If you are unsure, seek the advice of an independent professional adviser.
- If you are giving all or part of the money on a loaned basis, it is worth drawing up a contract outlining repayment terms. No matter how lenient or relaxed you may initially be about receiving the money back, circumstances can change and it’s useful to have the agreement in writing.
- Don’t be afraid to say if you are intending for the money to be spent on something in particular such as helping towards a property purchase. If you are giving the money to help towards a house deposit, consider helping the recipient put it into a Help to Buy ISA or releasing the money only when they’ve found the house they want to buy.
- Be aware of tax implications. You can gift any amount of money you like to your children without being taxed immediately or potentially at all, however if you pass away within 7 years of the transaction there could be tax implications.
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- Many older people have developed wealth from property, pension assets and other retirement savings including ISAs, so it’s important when thinking of loaning or gifting money to consider which of these are best to access. This is where independent advice is vital.