Should we help our young children buy a property together?

If my wife and I have been gifting the two kids €6,000 each for a few years, can we now help them to buy a property jointly? What would be the tax implications for them, as they are both under 18?

Mr A.G.

Tax might be the least of your issues here but, that aside, there’s a “can” and a “should” to this question and I think you and your wife need to think carefully, with your children, whether this is the right time for such a move.

With the relentless increase in property prices, it is understandable that people consider buying a home sooner rather than later. At a time when couples in their 30s and even 40s are having to live with their parents because they cannot afford to buy a home at current prices, given their level of savings and the amount they will be permitted to borrow, it is tempting to get on the housing ladder while you can – but the move you are considering could actually lock your children out of State support in buying a home later.

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And, as they are not even 18, it really is impossible to know how and where their lives will pan out.

You are also locking them into a joint purchase that may or may not suit their personalities or lifestyle as they get older.

The first thing to understand is that, legally, a minor cannot hold a property in their own name – although it can be held for them in trust. So if you were to buy your children a home, you would need to set up a trust to hold it in, at least for the next couple of years. That presents its own legal issues and costs.

But that aside, is it really a good idea to buy a home for someone so young? Are they mature enough to manage the asset properly? More importantly, where will they raise the finances to manage the inevitable household costs – insurance, maintenance, utility bills, even food?

Your children – and that’s what they still are – have their lives ahead of them. They may go to college, travel abroad like many of their peers, and find jobs that could be close to home, far from it or even abroad. There’s no saying whether this property would be any practical use to them; it might even be a millstone.

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Just one of the issues is that it will exclude them from housing incentive programmes such as Help to Buy or First Home shared equity which are open only to people who have never owned property in any country. Depending on how much tax they have paid in the previous four years, Help to Buy allows aspiring first-time buyers to claim up to €30,000 against the price of a new home. That’s a substantial amount to be turning your back on.

Your children can receive up to €400,000 each from their parents. So that means you could technically spend up to €800,000 buying them a home jointly without either of them having a tax liability on the transaction. However, they obviously would be liable to local property tax going forward.

Assuming they are not living in it as their main family home immediately, it would also open them up to a capital gains tax charge – though that is not a factor until they sell the property at some point down the line.

Whether you dip into that now to purchase a home for them or whether you bide your time and see when it might be of more practical use to them down the line is very much up to you. But if either child is settling down some time in the future with a young family, it may well be that they would find the money of more use to them at that point.

There’s certainly no need to rush as there is little likelihood of a significant drop on the capital acquisitions tax-free threshold in the coming years.

If you use it now to invest in this property, there will be less available in the future when it might be of more use to them.

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And there is nothing to prevent you in the meantime continuing to avail of the small gift exemption – allowing the children to receive €6,000 each every year between you and your wife.

If this property is simply to be acquired as an investment and you are paying its running costs for the next while, the additional household costs mentioned above will also count against your children’s capital acquisitions tax-free threshold – unless they can fall within the parameters of the small gift exemption, which is unlikely.

And if you have used up all of that threshold in buying the house, there would be a 33 per cent tax charge on each of them in relation to the “gift” of having those bills paid.

So can you buy this property jointly for your children? Yes, albeit in trust for now. Should you? Personally, I don’t think it is a good idea at all.

Please send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street Dublin 2, or by email to dominic.coyle@irishtimes.com with a contact phone number. This column is a reader service and is not intended to replace professional advice