tax liability for minor

T

Thomas D

Registered User
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Hi,

We have two children who were each left some money in a will by a relative. Each with the same amount. The kids are minors.

We are considering using this money, matching it with our own to buy an investment property. There would also be a mortagage of say 50% ltv. We would put the property in all our names.

Can i ask what the tax liabillity would be on something like this. Would the children be subject to income tax at the same level/rate as the parents. Is this a good way of doing this or should we consider something else?

Thanks.
 
Are your children agreeable to this? Would the person who left the money to them be happy that this was the outcome of their bequest? Just playing Devil's Advocate.
 
dereko1969 said:
Are your children agreeable to this? Would the person who left the money to them be happy that this was the outcome of their bequest? Just playing Devil's Advocate.
Click to expand...

Kids, let me explain negative equity to you..... ya I know I broke all the rules
- don't invest in a high risk asset
- don't borrow to invest
- diversify your investment to reduce risk..
Etc

What about college? Dad? Well eventually the market will rise and then...
 
Jim2007 said:
Kids, let me explain negative equity to you..... ya I know I broke all the rules
- don't invest in a high risk asset
- don't borrow to invest
- diversify your investment to reduce risk..
Etc

What about college? Dad? Well eventually the market will rise and then...
Click to expand...
College is what I am thinking of... they would have either somewhere to live, or else a source of income to help pay for college. Just wondering what the tax considerations are.
 
Property in shared names can lead to family disputes into the future as the financial goals or needs of those involved changes over time.
 
If you decide to go ahead and family considerations are not an issue, you should probably put the entire thing in the kids names. Any money you put toward it could be a loan from you to them. This would be difficult with the mortgage, but I know of someone who found a bank to go with it. You may need your name on the mortgage though not on the deeds.

The advantages are, the kids pay tax on the income, so they get tax credits and lower rate band. Whereas you would be taxed on your marginal rate.

Second advantage is that there would be no inheritance tax. It used be possible to transfer a second property to a child free of inheritance tax if the child lived in it for a period. This was recently abolished.

You would need good advice, specific to your circumstances.
 
Gordon Gekko said:
Why not buy iRes?

Or invest in a globally diversified portfolio?
Click to expand...

Because you cannot take advantage of leverage.

Because you are depending on the competence of managers

Because you have to pay those managers for their efforts

Because you have to trust those managers not to pay themselves excessively for their efforts.
 
cremeegg said:
Because you cannot take advantage of leverage.

Because you are depending on the competence of managers

Because you have to pay those managers for their efforts

Because you have to trust those managers not to pay themselves excessively for their efforts.
Click to expand...

- Good luck with trying to get a loan in a case like this, and in any event the debt will be pricey.

- It is very easy to find a good honest competent advisor.

- Is the proposal to run around with a hammer and screwdriver or pay someone else (i.e. a manager) to look after the property? Services cost money.

- Costs are easy to monitor and manage.
 
cremeegg said:
If you decide to go ahead and family considerations are not an issue, you should probably put the entire thing in the kids names. Any money you put toward it could be a loan from you to them. This would be difficult with the mortgage, but I know of someone who found a bank to go with it. You may need your name on the mortgage though not on the deeds.

The advantages are, the kids pay tax on the income, so they get tax credits and lower rate band. Whereas you would be taxed on your marginal rate.

Second advantage is that there would be no inheritance tax. It used be possible to transfer a second property to a child free of inheritance tax if the child lived in it for a period. This was recently abolished.

You would need good advice, specific to your circumstances.
Click to expand...
That is what I was thinking... as far as advice... would that be from an accountant, or FA, or bank?
 
All three and probably a mortgage broker, as the difficult bit will be getting a mortgage.
 
Out of curiosity, I wonder what this does for the kids' first time buyer status... It'd seem unfair to lose it because the parents foisted a share in a property upon them.
 
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