BUILD WEALTH FOR YOUR CHILDREN : Property is always a lasting gift for your children, and gives them a good start in life, writes 121yards Sometimes, one wishes to give a lasting gift to his children. An investment can be one of them. Investing on behalf of your children in property creates a gift that lasts a lifetime. You, as a parent, can buy a house for your child, after you have bought a house for yourself and ensured the funds for all other needs such as higher education, marriage and retirement. Buying a house for your child is a good idea because property prices are high and when your child grows up he will require a large investment to buy a house. By buying ahead you are subsidising the investment cost for your child. BENEFITS OF PROPERTY The first and foremost benefit of buying a home for your child is that it is an effective way of teaching him financial responsibility. As children become owners of property they learn many aspects of personal finance indirectly. It would help, of course, if you can talk about investing and savings to your child once he is old enough to understand. The second benefit is that when you child starts his life, his income will be small and he can ill afford a place to stay comparable to what he is used to when he is living with you. As he starts off, your property investment can be used by him to either buy a new house in the city he works in or encash it to start a new business. BUYING THE PROPERTY You can buy a property meant for your child in many ways. The first approach could be to gift the money to your child and use that money to buy a property. Monetary gift received from specified relatives, such as parents and grandparents, is exempt from tax. However, any income received from the property will be clubbed with the income of the parent who has higher income and taxed accordingly till the child is 18 years old. Under the law, you dont have to register a gift deed. However, it is always advisable to have a gift deed so as to avoid any gift being considered taxable or being considered unexplained cash, investments or assets. Do all these procedures seem very complicated to you? But think about the benefits, over a period of time the property will appreciate in value and create a durable asset for your child. The next option is to buy a property in your name and gift it to your child when he attains the age of 18 years. In this case too the rental income will be taxable in your hands and while transferring your property to your child you have to pay stamp duty and registration charges. The third option would be to buy a house as joint ownership with your child. This option is possible only if your child has some income stream on his own. This option is attractive with children who have attained 18 years of age. PLAN EARLY A young couple can start planning to buy a house for their child early - maybe even as soon as they get married. With many couple earning dual incomes this is not a far-fetched idea. From a financial planning perspective, it is important to first buy a house for you to stay in. After buying your house, you can start thinking on the lines of buying a house for your child. If you have more than one child, you have to think hard on how you plan to distribute your wealth among your children. Rather than buy one large house and ponder on how to distribute it among your children, you can buy two smaller flats. You can then give one each to your children. This planning is a part of longterm planning process of how you want to distribute your wealth among your children. It is time to start financial planning for your children when you have already provided for yourself and planned for your retirement.
Posted on: Sun, 24 Nov 2013 05:31:16 +0000
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