Property investment for a child ( Minor )

Discussion in 'Property investment and tenants' rights' started by Buckshee, 25 Sep 2018.

  1. Buckshee

    Buckshee Frequent Poster

    I do intend to seek professional advice on this matter but in general terms has anybody any experience or advice of the following scenario

    Buy a house now with a view to child ( currently a
    Minor ) having it as their resident in approximately 10 to 12 years time.

    Nothing very fancy, perhaps a 3 bed semi, which would be rented out in the meantime.

    Presumably ( subject to advice ) in the child’s name now but held in trust for the child until whatever age is decided for the formal hand over .

    How do annual tax. Returns fare out in comparison to a normal buy to rent ....????

    Any general advice from anybody with experience in this are appreciated before we go to get formal advice etc

    Thank you
  2. T McGibney

    T McGibney Frequent Poster

    Get advice, trust administration is a very complicated and specialist area. I understand that they're generally expensive, and tax-inefficient unless the child beneficiary is incapacitated.
    Brendan Burgess likes this.
  3. Brendan Burgess

    Brendan Burgess Founder

  4. cremeegg

    cremeegg Frequent Poster

    If you do not need a mortgage, this should be reasonably straightforward.

    Buy the house in the childs name, I cannot see the need for a trust.

    This is a gift to the child and uses up all or part of their inheritance allowance.

    The rental income is the childs and they must pay tax on it.

    The day the child turns 18, they could legally move in, sell the house, or anything else they choose.
  5. RedOnion

    RedOnion Frequent Poster

    I didn't think it was possible since the 2009 land & conveyancing act for a minor to directly own property?
  6. SBarrett

    SBarrett Frequent Poster

    Will the child want to live in the house that you want to buy them? What if they want to live somewhere else? Why not let them make the decision about where they want to live when they are old enough and you helping them out then?

    It would also be good for the child's development into adulthood and responsibility that they have to work and know the value of money before they are helped out with such a large financial gift. Le the child find their feet and direction in life first before giving them a house.

  7. Gordon Gekko

    Gordon Gekko Frequent Poster

    That’s why it’s a bare trust.

    An adult acts as “nominee” (i.e. legal owner) whilst the child is the beneficial owner.

    Such an arrangement has none of the complexity people associate with trusts.
    RedOnion likes this.
  8. RedOnion

    RedOnion Frequent Poster

    Thanks @Gordon Gekko
    Interesting. I use a bare trust to use the small gift exemptions each year to my children, but never thought of something like this (not that I could afford it yet).

    So with a bare trust, from a tax perspective it's the same as if the child immediately owned the property? So it's very different to the tax treatment within a discretionary trust.

    The value now would be counted towards CAT - if it exceeds the threshold the child would have to pay gift tax straight away.

    The cost would become the child's base cost for CGT in the future.

    And would rental income be taxed as the child's income each year?
  9. Gordon Gekko

    Gordon Gekko Frequent Poster

  10. dublin67

    dublin67 Frequent Poster

    The income is assessable on the parent to the extent that there is a taxable profit on the rent. This applies until the child is 18.