Helping the Bank of Mum and Dad navigate the financial minefield

Keith Barber

September 27, 2019

Keith Barber (pictured) business development director at Family Building Society.

As we know, the Bank of Mum and Dad, which on the basis of money it lends and gives away is the country’s ninth largest bank, continues to play a pivotal role in helping first time buyers. It is therefore essential that families are aware of the financial considerations and legal implications of helping their loved ones onto the property ladder.

Together with the London School of Economics, we carried out some in-depth research earlier this year which confirmed that, whilst parents are happy to help their children financially, there is rarely any meaningful discussion about the exact terms of this financial support or consideration about the longer-term financial and legal implications.

We have therefore published two new simple guides, written in conjunction with our trusted legal and financial planning partners. ‘Bank of Mum and Dad – A Financial Guide’ and ‘Bank of Mum and Dad – A Legal Guide’ provide important information about the legal and financial aspects of family help and advice as to how to avoid potential pitfalls.

The financial guide helps families understand the implications of their financial support and the additional planning they may need to take into account, whilst the legal guide highlights the legalities of such support and important areas that families should consider.

Here are some surprisingly common points that need to be clarified:

  • Can a child’s partner acquire an interest in the home despite making little or no financial contribution?
  • What could be the impact of inheritance tax?
  • Joint ownership – what are the implications of stamp duty land tax?
  • How and when should you act as a guarantor?
  • How should you reflect it in your will?
  • If a lender dies does the loan become a taxable matter?

Our recent research has highlighted that there is a minefield of unexpected consequences when helping children onto the property ladder. These new guides provide answers to this ever-increasing problem and can help parents understand the implications of any financial support they give.

We have now produced four guides on the subject of the Bank of Mum and Dad, which can help families with every step of lending to their loved ones. With proper preparation and planning, families can ensure that they protect their assets and have added peace of mind should the worst happen.

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