Investment Property & Trust – Allan

Investment properties, cash, jewellery and most types of assets can be left for your child through a special needs trust. But before you go off rushing to buy an investment property you need to think is this the right next step for your family.

I have lost count of the private consultations with parents who have purchased an investment property because of having a child with special needs. But it is incredibly rare for the investment property to achieve what it was set out to do. Many parents believe it will provide a guaranteed place for their child to live. Trying to predict the future and where your child will want to live and what supports they may need is virtually impossible.

In my opinion, parents should only ever buy an investment property if they have the financial resources to pay for all the costs. Whether or not it ever even gets a tenant or rents.

You should also be at the stage where you have cleared your home mortgage and you now have such a large amount of savings that you have worked out that investing in property gives you a better return even after weighing up all the risks. Only then do I believe you should start to contemplate whether or not purchasing an investment property for your child’s trust is the right move.

Do be aware that an investment property will be taken into consideration when parents personally apply for any means-tested payments such as Carers Allowance, Medical Card, etc. When the investment property is passed to your child through a trust then it doesn’t form part of your child’s means.

If you intend to buy an investment property, then you better have a very good business model worked out and have all your research completed.

  • How much you need to borrow?
  • What is your exit strategy?
  • Who is going to carry out all the different repairs?
  • How much rent will you receive?
  • What are the tax implications?
  • What happens in the next recession?

Make no mistake, purchasing an investment property is a huge step and should be treated just like starting a new business. You need to question yourself and your ability to manage the property and have you got the right experience to make it all a success.

You will also need to have numerous meetings with auctioneers, your accountant, solicitor, mortgage broker and other professionals who will assist you in the process. Do realise they will all say it is a great idea as they will all profit from your investment whether you ever make any money.

The goal I have for all my parents is for them to have set up a good strong financial foundation. That is having your letter of wishes, hospital passport, nest egg, trust life policy, trust and your Will binding these all together.

After parents have a good foundation then it on to the next phase of clearing all debts and building up their personal wealth. This may be purchasing simple financial products such as An Post Bonds or more complicated financial instruments such as investment properties.

Whichever road you choose to go on, always remember that the better financially you do then the more that can be left in a trust for your child. The more your child has in their trust then the more options available to them in the future.