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The Bank of Mum and Dad is often seen as the place to go to for help, but that doesn't mean they can't use some assistance themselves. Indeed, the latest research from Key suggests that many parents are worried they're making financial mistakes.
An overwhelming 76% of surveyed parents aged 55 or over found gifting rules complicated, with 40% believing there needs to be more support, in the form of online guidance for example. As it stands, 24% were worried they don't have the knowledge to make the best financial decisions.
Those most likely to seek help from the Bank of Mum and Dad seemed to agree, with 46% of 18-40 year olds living in rented accommodation worried about their parents' financial decision-making and the lack of support in this area. The vast majority (76%) want more done to assist the Bank of Mum and Dad through specific online information and guidance – a much higher percentage than among the parents themselves.
"Older homeowners in the UK own as much as £1 trillion in housing wealth according to our estimates and are also likely to have generated significant pension wealth as well as other retirement savings," Dean Mirfin, chief product officer at Key, said. "The challenge for parents wishing to lend or gift money is to decide which assets are the most appropriate and most tax-efficient for gifting."
In the same vein, 78% of over-55s would welcome tax incentives related to gifting money for major life events to their offspring. However, even if such tax incentives were available, it would probably be hard to take full advantage of them without some sort of advice. And yet, while 26% wanted to seek advice, a larger 46% worried that it would be too expensive.
To help, Dean put together some top tips for (nearly) retired parents who want to help their offspring. First and foremost, he emphasised the importance of talking to everyone who may be involved. While it may not be easy talking about money with family, helping your child financially means it's a good idea to put all cards on the table.
Given all the tax implications and rules around gifting, he also warned not to dismiss professional advice. Look into it to see how much it would cost, and remember how much it could save in the long run. If you really think you can go it alone and you are planning to lend your child the money, consider putting a contract in place. You never know when things might change in your life and getting the money back becomes a matter of urgency.
If you're happy to gift, you could consider putting the money aside in a special savings account – opened by your child – to ensure they have it when they need it. If you want to give the money specifically for the purpose of helping them onto the property ladder, you could even put it into a Help to Buy ISA, to make sure the money won't be used for anything else, as well as getting your child a nice Government bonus.
For those who don't have the money in cash, but would still like to help, equity release could provide the solution. For this it would be especially worth getting some independent advice, as it would have consequences for an inheritance and could see you without a backup plan if you find yourself short of retirement savings later on.
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