Gift or Loan? Protecting Family Relationships When You Help the Kids Buy

When parents help their children buy a property, one of the most important questions to settle at the outset is a simple one: is this money a loan, a gift, or something you expect to be returned at some point?

A gift might sound like the generous choice, and it can often make good relational sense. There are, however, many other considerations for both parties, including income tax, stamp duty, benefits, wills and estate planning, other children, and new partners. As our companion article on [link to "Gifting or Transferring Property to Your Children"] explains, helping the next generation into property brings a range of considerations, from stamp duty to timing, and the question of gift or loan sits at the heart of them. The structure you choose affects both sides, not only the children, as what suits a parent's financial or tax position may be quite different from what suits the child, and the reverse can also be true. The common thread through all of these considerations is the same: the earlier you seek advice, the better placed you are to make a decision that works for everyone.

Alongside giving you advice to help you make the best decision for your family, it is vitally important that your lawyer documents the arrangement thoroughly. A conversation around the kitchen table is a good start, though a gift or loan should be set out in a formal agreement prepared by your solicitor, so that the terms are clear and legally sound. Our goal is always to protect you legally, while also protecting the peace and harmony of your family, now and into the future, even as circumstances change.