Buying an adult child a house outright: long-term impact?

[Cozylittlecottage]

Have you done this or know anyone who has bought their adult child a house outright when they left uni or were in their 20s?

What impact did it have on their career/life choices and how are they getting on in life now?

Has it impacted their decision to get married?

I'm not a journalist ☺️ We're actually in the process of making plans to do this and I'm curious how it worked out long term. Did it sap them of career ambition or did it give them more confidence to pursue what they were interested in.

Just interested in the experiences of others who have done this. Thanks 😊

I would do it in a heartbeat, if I was in a position to do so.

We will be doing this. Why would it sap them of career ambition? It’s not as if a house is the only thing you need.

You may want to take some estate planning advice.

I was just thinking about the potential ramifications and if there were any downsides. I've heard people saying that it takes away ambition. I don't agree with this and think it would actually do the opposite because you can pursue what you're interested in without the pressure of a mortgage.

I come from a family where this wouldn't have even been an option or something my parents would have considered doing if they were in a position to do so. It just wouldn't have entered their heads even if they won the lottery!

I'm completely the opposite. We want to see them have an easier life not struggling for the sake of it.

The flip side is that it could get split in case of marriage and divorce. Which might be fine with you, might not. Prenups don't really work in UK law.

An alternative could be to buy a property for your child to rent for a nominal sum. There are implications on inheritance tax further down the line though.

I wouldn’t do this. They need to have something to strive for. Give them a substantial deposit but let them have a feeling of ownership.

You can gift your child the money to buy a house, and as long as you survive for 7 years there's no IT implications, but there maybe Capital Gains.

Not being rude, but if you can afford a house you can afford some advice from an IFA.

We have just done this so can't answer your questions on long term implications.

We have done this because DD is disabled and her and her DH don't have great earning power. Them having a house gives them stability, the ability to do adaptations as needed, a 'nicer' area (DD has previously had comments when out in her wheelchair), and hopefully the extra costs of running the home will be less than the rent was.

An additional factor was inheritance tax planning.

We have had the conversation with them that marriage is a legal contract. That if they choose to get married they need to do it in the full knowledge that they could end up giving away 50% of their assets.

If they are happy to to do that and accept that as a potential outcome then that is their choice and we will support their choice. But we made it clear that they need to understand there won't be more money coming to plug the loss. They will have to accept the loss and rebuild themselves.

No Capital Gains if the house is in the name of the DC not a second house in the name of the parent.

Thanks

We've got sufficient legal and tax advice. So it was more about the impact on their lives I was thinking about rather than the nuts and bolts of buying the property.

There's no CGT on a gift of money.

OP may want to think about insuring against the possibility of dying within 7 years- you can get special PET insurance which pays out on a declining basis over the 7y. Whether this is worthwhile depends on the rest of the estate How to structure the gift (from one parent or both) is also worth considering.

Housing (especially in London and the SE) is so expensive that it can have a really distortive effect on life plans. Avoiding that can offer a child a real springboard, especially if you can talk to them about what they could be doing with the money they would otherwise be spending on housing- if they can put £20k into a S&S ISA every year rather than spending that £20k on rent, that can be the basis for real financial stability later in life.

On the marriage question, these days pre-nups do plan some weight (especially in a short marriage without children). If it's a longer marriage or children are involved then it seems reasonable that it's a marital asset.

Both already have Investment ISAs and have had them since they were kids. We've paid in the full amount every year for them since they were young and will continue to put in £20k per year for as long as we can.

We have been teaching them passive income generation by building a dividend portfolio within the ISA, so they have sufficient income to cover their household bills. Wages could then be for enjoyment/savings/further investment.

They will be responsible for their own SIPPs/any other assets they wish to build.

We're also encouraging them to build up assets so they can do the same for their own kids if they have them, so the support gets paid forward.

Whether it saps their ambition largely depends on how they are already - only you as their parents can tell that. Are they already lazy, lacking motivation, take the easy route, quit easily? Or are they committed, ambitious, focused, hard-working?

It’s worth having a discussion with them about all of your expectations around this. For example, what if they decide to sell the home and spend all of the money on charitable causes - is it their money to do whatever they want with or is it still your money that you want some ownership of? What if they marry - presumably you want to ring fence the home to retain it as their and not share it with their spouse? What if they pre-decease you, would the house revert to your possession or could they leave it in their will to a long-term partner that they live with? All sorts of things to discuss to manage expectations later on.

A friend of a friend who did this said yes it sapped drive and motivation from the adult child who cycled through jobs and struggled with adult responsibilities.

It completely put me off doing it but we will be putting a home in trust for a significantly disabled child before we die.

In my family where this happened the child's marriage split up after many years and 4 children. The level of vitriol against the wife who wanted a share of what was her family home was brutal. Everyone in the family got involved in the divorce and those children haven't seen most of their father's immediate family (or their father but that was his choice) for years.

How awful

Fucking hell.
Will you adopt me?!? I’ve a feeling I’m older than you
having that financial literacy so young can make such a difference.

I realise now as an adult just what a difference that made for my friends vs me. Please share that knowledge with any of their friends who are open to it. Just knowing how it all works makes such a difference

I wouldn’t. Even if I were a multimillionaire. I think the ISA/SIPP etc is more than enough. A deposit maybe backed by a job and income. A full house just like that, no way. It infantilises them. Besides I agree that if they get married etc they should buy a joint property.

They're both highly motivated and academic, so I'm hoping this will enable them to pursue their passions.

Good points about expectations. I think that's something we will need to think about.

Part of me thinks once I've handed over the money it's no longer ours. So we will just leave it to them to decide where it goes next. I trust their judgement. I wouldn't expect to get it back again.

is Your child likely to be on track to be able to buy a home of their own?

weve spent £300,000 + renting, we’ve had upheaval after upheaval in our child’s life. They’ve never had a home, a room to decorate of their own. A proper garden to plant bulbs and know they’ll see them grow, they’ve always wanted a pond, never been able to have one. One particularly rough move (6 weeks notice) gave me a literal nervous breakdown.
meanwhile whilst I was planning suicide my mum was going on about picking a kitchen for her utility room in her second house they were renovating.

don’t be that mum either! There’s absolutely no way I could watch my child and grandchildren suffer like that when I could give them stability

@Cozylittlecottage

I know of a family with 3 boys. I have known them for decades. The boys have always been entitled (and spoilt) as far as I'm concerned. Not their fault, it was down to the parents!
They bought each boy a property... not cheap where they live, minimum of £450K. Youngest two went to Uni.

Eldest is a bit of a pothead, earns money as and when.
Middle boy doing OK reasonable job, now with a partner and baby
Youngest is the worst. He is 34 now and wanted to be an entrepreneur and never work for anyone. He does sod all, plays around on the stock market and rents out half of his gifted house for an income.

😂😂Not sure I've got it in me to parent another!!

I'm 51 btw, does that make me older or younger??

We are recipients of a large financial gift that meant we paid off our mortgage. My FIL gave us 500k. We are older/ in our 40s though and have been married 10+ yrs. There is no lack of ambition here and both earn above average salaries (despite me working part time), if thats a measure of ambition. Ambition basically depends on the person. In laws are wealthy and made investments that paid off. BIL is also MF.

I dated a guy for a short time whose parent's did this. He was lazy, coasted through life and hadn't even changed the decoration in the house which was very 1980s despite him being there for ten years already. I found I couldn't respect him. He also told me that his multiple siblings had all been bought houses outright so not sure how they were managing as didn't stay with him long enough to find out.

That sounds amazing. They’re very lucky. That said, if they are financially covered from every angle as well as no mortgage it could sapp their drive to succeed. A lot of what has motivated me has been drive plus the need for money. You know your children, it will very much depend in vast part on their personalities. Some kids in this position want to prove they are not just going to coast along as they’re financially stable and are even more motivated to prove themselves.