Buying adult child a flat

[Bluestocking12]

I have come into a substantial amount of money and will be hammered with IHT unless I do something . My adult child is in a career that is not well paid and will find it very difficult to buy a property and is paying a huge amount in rent. I could just give them a house but do not understand the complications regarding IHT. I understand the life time rule etc and the seven years stuff. I have a financial advisor but I know they will say no because there is nothing in it for them and they would prefer investments. Any advice out there

Sounds like a bad financial advisor!

Yes, you can do this and it will be outside IHT if you survive 7 years. There is a sliding scale if you die between now and 7 years. You'll have less stamp duty to pay if you give the money to your child to buy a flat (even if it's just before) rather than buying the flat yourself and giving it to them.

Get an accountant and ask them :)

You need to ask a solicitor to do a deed of variation to the will in which YOU were left money. You can vary the will to leave all or some of the legacy to your DC. They will then receive the money directly and no IHT would be payable.

Look into doing a deed of variation for your child from the estate you have inherited from .
I believe you have up to two years from death to do this and then it becomes part of the estate you have already inherited and falls out of your estate.
get legal advice on this though

@coldandfrostymorning23
great minds and all

OP hasn't said she inherited it though.

It’s been more than two years . So far just in savings and investments but nearly 1m . This is excluding the assets ( capital ) that DH and I have . So I think I should do something instead of DS struggling.

Was the estate dealt with by a solicitor? If so, it is surprising they did not discuss a deed of variation with you at the time you inherited. You are now outside the time limit.

Your best bet is to gift a sum of money to your DC. That money is then outside your estate and any IHT due will be gradually reduced. There is a 100% reduction if you survive seven years after making the gift. By gifting the money you also leave any decisions on house purchases etc to your adult child so will not be seen as controlling/interfering.

You say you have a financial advisor. You need to speak to an estate planner. Your Financial Advisor should have told you this. With an estate worth £1m + the cost will be well worth it.

My parents gave me an early inheritance as a house deposit, I’d have struggled to get on the housing ladder in the expensive area I live in as a single parent and I so appreciate it. I think you should definitely help them with housing if you can, it will make a huge difference to their life. My parents have now lived more than 7 years since then so no inheritance tax to pay. They’ve written it into the will that I’ve had that already though to make it fair for my siblings.

PS Some estate planners will recommend trusts, but the admin overheads are significant and probably not worth it in your circumstances. Trusts are useful for large estates or where the potential beneficiaries are unable to manage the money themselves.

If you have over a million sitting around doing nothing, I'd be getting him a house rather than a flat.
Before you said the amount, I was going to suggest putting the money you want to give towards a house, with a small mortgage for him, rather than buying a flat outright.

I would do it if I had the money.

Hugely helpful. So I think it best I gift the money and they buy the flat . Just hope I live the 7 years. This amount is separate from DH So would go to DC if I die. Would I be better of it went to him on death if I die first. His Estate ( widower but no children) is left to me .

I think if you have that much spare it would be wonderful to give your DS a house deposit / flat. I assume he’s an only child? If there are other DCs doing better I really would advise being fair and giving them all the same amount.

No IHT complications except the 7 year rule provided it’s a genuine outright gift and not a “gift with reservation” where you retain rights to stay in the house or something.

You are probably correct.

However you should definitely get some professional advice before you proceed. It will be money well spent.

No IHT benefit of it going to DH first, and plenty of risk ( care home fees, a new wife ect). As others have said do double check with some professional advice, but overall if this is a early inheritance you want to give your DS and you can afford to make the gift outright this is a well trodden path and there should be no issues.

I would totally do the same. As long as you live 7 years after the gift, there’s no IHT implications.

I sat on it because I felt strongly that DC should make own way but they work so hard and I see others being helped. The sooner I do it the better .

I get that. But from what you say it sounds like your DS has found his own way. He has a career, works hard, pays his own rent. He’s not suddenly going to become a trust fund layabout because you help him have a secure home ❤️