Parents love gifting things to their children. Many parents even gift property to their children. What better way to show love and affection to your children than gifting a property? But, is this a good idea?
More than 66% of all civil cases are either land or property disputes. Around 25% of all cases which are decided by the Supreme Court are land disputes. If you buy land or property for kids, but die intestate (Die without making a WILL), your children would fight among themselves.
Yes, parents do care for their children. They save and invest for their children with good children's education planning. Children’s education and wedding are crucial for a career and to achieve long term goals. But, parents with money to spare prefer to leave a legacy like vast property for their children.
Does buying property create problems in children’s lives or does it ease their financial lives? Let’s check out the pros and cons of buying the property and leaving it as a legacy for children.
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If your children are rich and have settled abroad, managing a property in India is a big hassle. They would not need the house for personal use. If they want this house after retirement, it would have to be renovated at a huge cost. They would also have to be physically present to supervise any renovation. If the property is bought for investment, selling it could be really difficult if your children are in far off places.
If parents die early to say in an accident, minor children cannot manage the property. If there is no WILL, the property could land in the wrong hands. Relatives could steal the property.
If you are buying a property for children who are minors, make a WILL. Place the property in a trust, clearly specifying who gets it on an untimely demise. Choose the executors of the WILL, and trustees for the trust, carefully.
If you are buying property as an investment for children and not for personal use, it’s good not to pass on the property through a WILL. Dispose of this property in your lifetime and then split the money among children. Take a look at different investments that are easier to pass on to children.
Reverse Mortgage is the opposite of a home loan. In reverse mortgage, you borrow against the value of a house. You simply mortgage the house to the bank and the bank would make payments in a lump sum or periodic payments.
Depending on the demand for property, the current property prices and the condition of your house, the bank would disburse the loan amount. This could be around 60% of your property value disbursed either as a lump sum or periodic payments. These periodic payments are also called reverse EMIs. They are paid over a maximum of 15 years. The payments you make don’t attract capital gains tax or income tax.
If you want to pass on the property to your children, but your children don’t need it, think again. You could be running short of funds in retirement, and you need the money. Go for a reverse mortgage.
You get additional income when you are alive, to manage the day to day expenses. The property could easily be disposed of on death and your kids will not be troubled. The bank will sell the property after your death and your kids will have no deal in it. If your kids want to retain the property, they would have to repay the reverse mortgage. (This is the borrowed amount and interest).
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