Should I pay off my daughter’s mortgage?
YOURS SAYS: Older parents who have assets large enough to put them in the inheritance tax (IHT) bracket might want to help their children in this way as part of their IHT planning.
Alternatively if your daughter’s mortgage is at an uncompetitive rate and her personal situation means that she wouldn’t qualify for a remortgage, a family arrangement whereby you refinance the mortgage but at a lower rate might be worth considering. Or you could also consider paying off part of your daughter’s mortgage which would reduce the LTV (loan to value) and help her to remortgage at a more affordable rate.
Our grandson is off to university this year. Should we help financially?
YOURS SAYS: Many universities charge the maximum of £9,000 a year and most of us don’t like the idea of youngsters being ‘saddled with debt’. However, graduates do not have to start making repayments until they earn £21,000 a year so the system works more like a graduate tax.
Even if the maximum loan available is taken out, the family can still find itself struggling to cover the student’s living costs. If you’re able to help towards these costs it would probably be very welcome. Lots of students have part-time jobs, or he could consider studying for a part-time degree while working part-time, or signing up for a modern apprenticeship.
How can I help my son get on the housing ladder?
YOURS SAYS: The obvious solution is to gift him the money from your savings, if you have them – but only if this won’t leave you short of funds in the future. Alternatively you could borrow the money, for example with a loan, or act as a guarantor either by using your income or the equity in your property.
Another route would be equity release. The advantage of this option is that with some plans you can draw on further funds if you need to in the future.
You don’t need to repay anything during your lifetime as this, plus any interest, is repaid from the sale of the property, usually when you die or move into long-term care.
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What’s the best way to give my niece money for her birthday?
YOURS SAYS: If your niece already has a Junior ISA (JISA), you could pay your gift directly into that. JISAs are an ideal way to provide children with a tax-efficient savings and investment account. No withdrawals are permitted until they reach 18, when the money is transferred to an ‘adult’ ISA when they have full access to their investments and savings.
There are also tax-efficient products available from NS&I (www.nsandi.com, 0500 007 007) such as Premium Bonds (minimum investment £100) and Children’s Bonds (minimum £25) but they can only be bought for a child under 16 by parents, legal guardian or grandparents.
How can I encourage my grandchildren to become savers?
YOURS SAYS: Give them a piggy bank and encourage them to save some pocket money weekly. Match their savings on a £1 for £1 basis and give them cash for doing jobs around the home.
Open a savings account with a decent interest rate and get them into the habit of emptying the money box into their account. Draw up a wall chart and colour it in as their balance grows so they can see their progress, and offer them an incentive when they reach a particular goal.
My daughter-in-law needs to borrow about £9,000 but how can I be sure I’ll get it back?
YOURS SAYS: Lend the money by all means – but not more than you are willing to lose. Should circumstances change and the money cannot be repaid, you wouldn’t want this to be the cause of friction within the family. It’s good practice to draw up a simple agreement and arrange for monthly repayments by standing order. Factor in some interest.
A bank would typically charge five per cent – so perhaps a simple interest charge of, say, 2.5 per cent would be about right. This would add £225 to the initial £9,000 loan. Repayments over three years would be £256.25 per month – or £153.75 over five years.
How should my son best invest the inheritance he has been left?
YOURS SAYS: With an inheritance under £10,000, he should repay any debts; then set up a contingency fund equal to three months’ income using an easy-access savings account. With anything leftover or if the inheritance is considerable, consider a New ISA (NISA). He can invest up to £15k a year in a cash NISA and nothing to a stocks & shares ISA; £15k to a stocks and shares NISA and nothing to a cash NISA; or a combination of cash and a stocks & shares NISA, up to the overall limit of £15k. The stock market is a riskier home for his money than cash, but in return for risk comes the potential for decent returns.
He could also boost his pension with a lump-sum payment but should consult an independent financial adviser to find the best course of action for his circumstances. Find one at www.unbiased.co.uk
FREE UP CASH TO HELP THE FAMILY
“For those who would like to give financial help to children or grandchildren, but worry about their own financial pressures, consider releasing a cash lump sum from the value of your home,” says Dean Mirfin, the resident expert for Yours Retirement Services.
“With an equity release plan you can unlock funds from your property to spend as you wish. Yours Retirement Services can help you understand all the pros and cons of releasing cash from your home, for example, how a plan will reduce the value of your estate. Call 0800 915 4710 for more details.