Q I am over 70 and have at least £100,000 in an e-savings account, as well as £35,000 in fixed-rate bonds. My house, which is paid for, is worth more than £250,000. With two children who have their own mortgages - one variable, one fixed rate - would it be possible for me to give, donate or invest at least two-thirds of my capital to help them ease their payment burden? I was considering two lump sums to reduce their outstanding debts, but would it be better to concentrate on the fixed-term loan as that hasn’t benefitted from the interest rate changes? ST

A If you want to retain control over your capital and continue to earn interest I would not advise giving your money to your children, because once you have made a gift you cannot ask for it back. What you could do is lend it to them at a rate of interest that is lower than that they are being charged by their mortgage lenders. But if you did lend them money and charge them interest on it, you would have to pay tax on the income in the same way that you do on the interest you earn from your e-savings account.

Giving the money to your children would be much simpler, but you need to be absolutely sure that you genuinely do not need two-thirds of your capital, or the interest you are earning on it.

If you were to give away your money to reduce your children’s mortgage burdens, you are right in thinking that the one with the higher interest rate would benefit most from your generosity. However, for the sake of being fair to both of them, and to avoid family ructions, I would give each of them the same amount. And before you part with your cash it would be worth checking that repaying a large chunk of their mortgages would not result in early repayment charges, which may well be the case with the fixed-rate mortgage.

However you choose to help your children - whether by lending or giving - it would be well worth getting professional legal advice. You need to make sure that everything is clear and well-documented, and a lawyer will also be able to explain any inheritance tax implications if applicable.

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