Parents are predicted to “lend” more than £6.5bn this year to help children get on the property ladder. That is a staggering amount of money — similar to the total amount lent by Yorkshire Building Society — the country’s ninth largest mortgage lender.
Parental assistance is expected to have risen to an average of £21,600 this year with 79% of funding going to people under 30. Of course parents want to help their kids get on in life and the “bank of mum and dad” is a testament to their generosity, but it is also a symptom of our broken housing market.
Generational inequality is continuing to widen in other areas such as pensions, free university education, etc.
£6.5bn is a huge amount of money. I find it very surprising that there are so few resources available to make sure that parents get this right and protect both themselves and their children. If the right documentation is not in place a “loan” can soon become a “gift” with disastrous family consequences in the event of a marital breakdown. On the other hand routing the loan via a Family Trust can add very significant inheritance planning benefits to the entire exercise.
So by all means help your children, provided it does not put your financial future at risk, but do some research and make sure the documentation is both robust and flexible.
If you need some help let me know and I can put you in touch with the experts in this field.
Ps. If you are really interested in helping your children please, please make sure any death benefits from your pension plans are structured properly. Now that is an area where I can really add some value.
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