With property prices remaining high, many would-be buyers can find themselves priced out of the property market. So it’s unsurprising that the Bank of Mum and Dad continues to be one of the UK’s major sources of housing funds. Financial support can range from giving a small amount of money to help with things like fees and the costs associated with setting up a home, to providing the full deposit or even more.
Recent research (Legal & General, the generosity of the Bank of Mum and Dad, May 2018) shows that although the Bank of Mum and Dad is still likely to lend more than £6bn to family members this year, helping out in over 315,000 property transactions, parents are starting to feel the squeeze. The survey, carried out by L&G, shows that the average parental contribution for home purchase will be £18,000, down 17% from last year’s figure of £21,600.
Protecting their interests
Often dubbed ‘the sandwich generation’ because they are sandwiched between caring for their children and looking after their ageing parents, those parents in the squeezed middle have a lot of calls on their time and money. Many find themselves looking after or arranging care for elderly relatives, whilst at the same time often feeling under pressure to continue working past their normal retirement date to help their children financially. This support can often include allowing grown-up family to live at home rent-free, or even helping to pay their day-to-day living expenses. The worry here is that in looking after others, they are neglecting their own financial needs, and not saving enough for a comfortable retirement.
Get advice before giving money away
Making sure that they have made sufficient provision for what could be over 20 years spent in retirement should be a financial planning priority for any parent. After all, retirement ought to be a period of relaxation and enjoyment, not a time spent worrying about money.
Giving away large sums of money can have tax implications, so getting advice makes good sense. If for instance you already own a home, and you choose to be the co-owner of your child’s property, you could find yourself liable to additional rates of Stamp Duty, as you’d be buying a second home. Giving away more than your annual tax-exempt allowance of £3,000 could have inheritance tax implications if you were to die within seven years of making the gift.
OFTEN DUBBED ‘THE SANDWICH GENERATION’ BECAUSE THEY
ARE SANDWICHED BETWEEN CARING FOR THEIR CHILDREN AND LOOKING AFTER THEIR AGEING PARENTS, THOSE PARENTS IN THE SQUEEZED MIDDLE HAVE A LOT OF CALLS ON THEIR TIME AND MONEY.
If you’re making plans for your retirement and would like some professional advice, then please get in touch.
Tax treatment depends on individual circumstances. Tax treatment, rates and allowance are subject to change.