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Key, Baines House,

4 Midgery Court, Fulwood,

Preston, PR2 9ZH

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Bust-ups at the Bank of Mum and Dad

Collectively the Bank of Mum and Dad (BOMAD) is a major UK financial institution, but a recent nationwide study has shown that one in five parents don’t reveal how much each child gets.
 
With rising rental and property costs, alongside stagnant wages, many younger people are finding they need a financial boost from their parents. Industry estimates* show BOMAD is expected to pay out around £5.8 billion this year for housing transactions alone with Key’s research showing BOMAD is also helping with a range of other financial issues. Around 10% of homeowners aged 55-plus who expect to give money to help younger members of their families will pay for cars while 8% will put it towards paying for a wedding**.
 
Our research found around two out of three of homeowners aged 55-plus believe their children would be happy for them to give more money to siblings if they need. However, many of these say they are too worried about disputes to discuss money with their children.
 
We believe advice is key and families should wherever possible seek independent help whether it’s from financial advisers or lawyers. Our experience also indicates that the option of face-to-face advice can be important in getting all parties together to help everyone understand and agree on the approach.
 

Points to consider when loaning or gifting money to children should include:

 

  • Establish from the beginning whether the money is a gift or a loan. If it’s a gift, then there should be fewer problems

  • But if it’s a loan then it’s worth seeking legal advice and particularly if the loan is for buying a property and your child is married or living with a partner

  • If you’re a homeowner and become a shared owner of your child’s property, then your interest in the property will be regarded as a ‘second home’ which means you will be charged a higher rate of Stamp Duty Land Tax on the transaction.

  • If the money is a gift it could incur an Inheritance Tax Charge and specialist financial advice on estate planning could be valuable

  • It is important to consider updating your will particularly if you have more than one child and potential beneficiaries

    *Legal and General
    **Research conducted by independent researchers Consumer Intelligence among a sample of 950 homeowners - with children or grandchildren - aged 55+ between 2nd July - 10th July

     

You may also be interested in: The Bank of Mum and Dad

 

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