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Money & relationships: Pros and cons of buying property for your children

Nearly 66% of all civil cases are related to land or property disputes, while 25% of all cases decided by the SC involve land disputes. So, if you buy a house for the kids, but die intestate, the property may create differences among siblings.

, ET Bureau|
Nov 04, 2019, 06.30 AM IST
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Before buying a house for the progeny, consider whether it is likely to create problems for them or boost their financial status.
For most parents, children’s education and weddings are among the most important goals when it comes to financial planning. For those with money to spare, leaving a legacy, be it property or other tangible assets, is the next big milestone. While buying a house for children is a personal decision that is dictated by one’s financial status, is it really a practical way to pass on one’s inheritance? Does a house create more problems for the progeny or does it ease their financial lives later on? Find out the pros and cons of buying real estate for your children as a legacy.

Property disputes: Nearly 66% of all civil cases in the country are related to land or property disputes, while 25% of all cases decided by the Supreme Court involve land disputes, according to the Centre for Policy Research. So, if you buy a house for the kids, but die intestate (without a will), the property may create differences among siblings. This is more likely if a single property is required to be split among two or more siblings. Even if you prepare a will, disposal of property is typically open to dispute after the parents’ death. Besides, archaic property laws ensure that the judicial resolution takes several years, in addition to a lot of money.

Personal use: If your children are affluent and have settled abroad or are in different cities within the country, it is unlikely they will need the house for personal use. If they do retain it to settle down after retirement, it will require major renovation, for which they will not only have to shell out huge sums of money, but also be physically present to supervise it. If you have bought it as an investment for them, selling it can also be a cumbersome process for children staying in far off places.

Premature death: In case of accidental or premature death of parents, it is likely that the children would be minors and incapable of managing the property. In the absence of a will, it can easily fall into the wrong hands of relatives or acquaintances. So if you are buying property for children who are minors at the time of purchase, make sure that you immediately prepare a will or place the property in a trust, specifying how, when and to whom it is to be transferred if you were to pass away unexpectedly. It is also important to choose the will’s executors and trustees carefully.

Investment: If you are buying the property to be used as an investment by your children and not for their occupation or personal use, it is a good idea not to pass it on to them through a will. To avoid disputes, dispose it of during your lifetime and split the money among them. You could also look at other investment options with similar returns that are not as cumbersome to pass on.

Reverse mortgage: If you want to pass on the property that you are currently living in, but realise that the kids do not require it or that you are running short of funds in your sunset years, you could opt for reverse mortgage. This could not only help generate additional income for you while you are alive, but also provide a good way of disposing it of after you pass away. This is because the lending institution will sell the property after your death and the kids will not have to deal with it. If, however, they want to retain it after your death, they should be made aware that they will need to have sufficient funds to pay the loan and take possession.

If you have a wealth whine, write to us...
All of us have been in a financial dilemma when it comes to relationships. How do you say no to a friend who wants you to invest in his new business venture? Should you take a loan from your married brother? Are you concerned about your wife’s impulse buying? If you have any such concerns that are hard to resolve, write in to us at etwealth@timesgroup.com with ‘Wealth Whines’ as the subject.

Disclaimer: The advice in this column is not from a licensed healthcare professional and should not be construed as psychological counselling, therapy or medical advice. ET Wealth and the writer will not be responsible for the outcome of the suggestions made in the column.

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