Family ownership of property: sharing property wealth with the next generation
According to a recent article in the Telegraph householders over the age of 50 now own about 75% of the country’s homes. In figures that amounts to about 2.8 trillion in property equity.
The Telegraph research information was provided by leading agents, Savills, who report;
- The generational divide in property ownership applies across Britain;
- That 60% of people who are currently renting a property want to buy their own home;
- The number of households that own their own homes has reduced by 10% to about 62%, reflecting rising house prices and static wages.
As private client and family solicitors we are often asked about housing options when, for example:
- A husband or wife is getting divorced and can’t afford, on their own, to take over the mortgage to stay in the family home ;
- An older couple want to make sure that their son or daughter is able to get on the housing ladder but are concerned about their deposit being kept safe;
- A family is thinking of moving in together so there is a three generation household;
- A person is thinking of buying a house and doesn’t know if their partner should be a joint owner or not;
- An older person is thinking of downsizing and either transferring their house to a child or gifting money to a child or grandchildren.
No two families are the same and so one solution doesn’t fit every family. Generally there are a number of property solutions, for example:
- If a husband or wife can’t afford to stay in the family home after a divorce either because they can’t afford to take over the existing mortgage or to borrow more money to buy off a former partner then a parent or other family member could stand as guarantor to the mortgage ;
- If a couple want to get their child on the property ladder they could lend the child them money with the loan secured against the house. The loan can suit the family, for example, interest may or may not be payable or interest could be accumulated and only paid if the house is sold;
- If three generations are moving in together the property could be jointly owned by all the adults with a deed of trust setting out the details of property ownership or the mid generation couple could be the legal owners with the older generation having a right to occupy the house;
- A person buying a house could either buy jointly with their partner or on their own – if the property owner is in a relationship they should sort out a cohabitation agreement whether or not their partner is a joint owner or lives at the property with them;
- If a person is thinking of giving property or money away they can do so during their life through what is known as lifetime gifting. Gifts can be made outright or money can be put in trust for family members. Alternatively the gift could be made outright but protected by the family member receiving the gift asking their partner or spouse to sign a cohabitation agreement or post-nuptial agreement.
What solution fits?
The right ‘’property solution’’ is down to a number of factors, for example:
- Inheritance tax implications of making a gift or putting money into a trust;
- The need to protect family money from potential financial claims on the separation or divorce of a family member;
- Family circumstances and personal preferences.
Given the range of options it is always sensible to get legal advice from specialist private client, estate planning and family solicitors before gifting money to family members or moving in with a partner. Early bespoke advice can make sure that you make the right decisions for you and your family and protect your loved ones.