Is it better to pay off or save, go for solar panels or a heat pump, or not hire a broker? In the section The money dilemma we compare two options that affect your financial affairs. This time: is it wise to donate money to one of your children so that he can buy a house?
The question is topical, because it is now even more interesting for young adults to get a house to buy quickly.
In the first three months of 2021, people under 35 will not have to pay transfer tax for a home, normally a tax of 2 percent on top of the purchase price. From April this is only possible with a purchase price of up to 400,000 euros.
It is possible to give a pot of money to one child without inheritance consequences. The tax authorities even help with the donation: you can make a one-off donation of up to 105,302 euros tax-free to anyone you want to finance a home, the so-called ‘jubelton’.
‘Nice to discuss how to equalize the donation’
“But in most cases, parents don’t want to favor one of their children. And they don’t have to, but if you do, I think it would be a good idea to make agreements with the other children about how to equalize such a donation. Immediately or in the long term? “, Says financial planner Anja van Zandbergen.
One way is to put it on paper that the amount donated will be deducted from that child’s inheritance on the day the donor dies. You can draw up and sign such a gift agreement yourself, so you do not have to go to the notary for it.
“But then you have not completely straightened out the donation in relation to the other children, I think,” says civil-law notary Aniel Autar. He is referring to the fact that homes often increase in value and that the invested donation can therefore become worth more in the future. To compensate for the increase in value, you can have a so-called bequest drawn up. For that you have to go to the notary.
Lending instead of donating
Another way to treat all of your children fairly if one of them wants to buy a house is to lend the money instead of giving it. This construction is sometimes referred to as the family sofa. “As long as you do it according to the regular mortgage conditions, you can apply a mortgage interest deduction to such a loan, just like with a regular bank,” says Van Zandbergen.
This means, among other things, that the loan must be repaid to the parents within thirty years. The parents must also request an interest that is comparable to the mortgage interest at the bank (currently around 1.5 percent).
“Many parents do not want to make money from their children by receiving interest.”
Aniel Autar, notary
The family bank can be very beneficial for both the lender and the borrower. That is why it is also becoming increasingly popular when buying a home, say Autar and his colleagues at Kooijman Autar Notaries.
“Many parents do not want to earn money from their children by receiving interest. What they do – and this is also allowed – is that they receive interest from the child, an expense that is deductible for the child (through the mortgage interest deduction, ed.). Then the parents return the interest to the child. ”
In one fell swoop, the child received both a deductible item and a gift. This may sound too good to be true, who pays for it? The tax authorities – or the taxpayer – do this in the form of the mortgage interest deduction.
Source site www.nu.nl