'Bank of Mum and Dad' fuelling Scots property market, with wealth being passed on early to help purchases
Family money continues to fuel the Scottish property market – as parents and grandparents opt to pass on wealth early to help the younger generation get on the ladder, according to new research.
Rathbone Investment Management has pointed out that home ownership continues to remain out of reach for many young people, with house prices going up by 6.9 per cent across Scotland over the past year – a period in which many have faced financial difficulty.
The investment management specialist said the “Bank of Mum and Dad” has in some cases therefore stepped in to help.
It found in a survey carried out in February that 28 per cent of respondents have or are considering passing on their wealth early to help children and grandchildren with property purchases or other significant expenses – rather than passing the money down via inheritance with the risk of a large tax liability.
The poll of 504 high-net-worth individuals (HNWIs) – those with more than £250,000 of investable assets – and business-owners across Scotland also found 29 per cent have put money into a trust for their children or grandchildren, while just over a quarter have contributed to their university expenses.
It comes as Scotland’s residential property prices are expected to “more than weather the storm” in coming months.
Rathbone Investment Management said the decision to pass wealth down early is partly down to a larger trend over the past year that saw many look to get their financial affairs in order, with many people having had more time to plan ahead and explore ways they can implement a financial plan.
Some 35 per cent of those surveyed have met a financial planner for guidance on passing on their assets.
Additionally, a third of individuals have spoken to their loved ones about their financial plans. However, only a “fraction” have made these plans official, and just two in ten surveyed have made a will.
Kindar Brown, senior financial planner at Rathbone Investment Management, said: “With all the events of the last 12 months, putting a financial plan in place has moved further to the front of many people’s minds, highlighted by the uptick in enquiries to speak with a financial planner.”
The investment management firm has outlined advice for people wanting to sort their financial wishes such as establish a financial plan, make a will and regularly review it, and consider whether you want to gift and how much.
Ms Brown said: "Taking the time to review your financial affairs now and make sure everything is in order can provide peace of mind that your loved ones will be protected, and your wishes met, should the worst happen.
"As part of your plan, you could, for example, consider whether passing on wealth during your lifetime rather than within your will would make sense for your circumstances.
"If you won’t have need of the money in the future, then helping your children or grandchildren with those important – and often costly – life stages could be an effective and tax-efficient route to take, depending on your situation.”