When your children leave home for university...

cozens hardy feature

cozens hardy feature - Credit: Archant

At this time of year, many parents have bid farewell to their sons or daughters as they leave home for a new life at university. Often our youngsters are lured away to the big cities with bright lights, many miles from home here in Norfolk. So what are the investment options available to you as the parent? PHILIPPA RUDD, head of conveyancing at Cozens-Hardy solicitors, discusses.

This could be a perfect opportunity to consider investing in bricks and mortar for your son and daughter, rather than wasting your hard earned money on rent for three or more years. These university towns often have attractive residential areas near the universities and prices tend to be steadily climbing. If you have reached this decision, there are then many factors to consider. Should you buy in your name or in the name of your son or daughter? If bought in his or her name, you would have no control over the property and if you and your child fell out with each other, he or she could sell the property without your knowledge. Likewise if your son or daughter were to marry and then divorce, the property would be at risk. Or he or she could have financial problems and lose the property. If mortgage finance is needed, you may well have to buy the house in your name as your son or daughter is unlikely to be able to obtain a mortgage.

There are, however, tax advantages of buying the property in your son or daughter's name. If you give the money to your son or daughter, there will be no inheritance tax to pay on the gift providing you survive for seven years. Also from a Capital Gains Tax point of view, it is better to buy the property in the name of your son or daughter, as the property will be his or her 'principle dwelling' (home) and free of Capital Gains Tax when it is eventually sold. If the house were in your name you would pay Capital Gains Tax on any profit. Further, the rental income from any lodgers will belong to your son or daughter, rather than to you, which will be beneficial, as he or she would probably pay no or little income tax on the rental income whereas you may be a higher rate taxpayer.

Despite these tax advantages, many parents conclude that they prefer to retain control of their investment and buy the house in their own names.

As well as helping you to decide in whose name to buy the house, your solicitor can guide you through the other legal points. If you own the house (rather than your son or daughter), we can prepare a tenancy agreement and we will draw your attention to the legal requirements of letting such as lodging the deposit with the Deposit Protection Scheme and arranging for any essential gas tests. If your offspring owns the house, your solicitor can likewise prepare a letting agreement for any 'lodgers' and we can discuss the tax aspects of the rental income (the 'rent a room' scheme may mean that there is no tax to pay).

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There are a number of factors to consider and you will need expert advice in this regard but once you have taken all these points into account, buying a house in a student area could be a very wise investment.

You can contact Cozens-Hardy LLP solicitors at: Castle Chambers, Opie Street, Norwich, NR1 3DP tel: 01603 625231 www.cozens-hardy.com

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