It is a sign of the times that many parents are passing an inheritance to their children early to help the children on to the property ladder. The media now use the term 'BoMaD' – the Bank of Mum and Dad.

A recent report by Legal and General, in association with the Centre for Economics and Business Research, has suggested that BoMaD contributed £5 billion in 2016 to property purchases totalling £77 billion overall. This made BoMaD the equivalent of a top ten lender.

There are a range of options available to parents wishing to help their children, each with practical and taxation consequences.

If you do not have capital to help with a loan or gift, it may unlock a better mortgage deal for your child if you were able to act as guarantor, though the obvious risk is that you could be liable for repayments if your child defaults.

You may have sufficient funds to provide the child with a gift. A gift of cash will not prompt an immediate inheritance tax (IHT) cost, but raising funds from other sources such as an investment portfolio could trigger a capital gains tax (CGT) charge. If you survive seven years from the date of the gift, the value falls out of your estate for IHT purposes.

Some parents might consider raising cash for a gift by mortgaging an existing property of their own. We have found some lenders to be inflexible on this due to age, failing to consider the parent's individual circumstances such as income, savings or the loan to value ratio on the property being mortgaged.

Alternatively, you could make a loan and take a charge over the property as security. The value of the loan remains in your estate but the capital growth in the property would accrue to your child. The loan can later be released as a gift if you wish.

If mortgage finance is being used by your child as well as a loan from you, we find that in practice some lenders will not lend. Others will lend but will require a first charge over the property, so that they have first priority on any sale proceeds if there was any default in repaying the mortgage.

You may consider buying a property for your child to live in and later gifting it or a percentage. Whilst control of the property would rest with you, you would face an additional 3% stamp duty on the purchase price and higher CGT on a disposal (by sale or gifting) as it is not your principal residence.

Another aspect to keep under review is how any lifetime provision relates to the shares of your estate children might receive under your Will.

There are many possibilities and unless good advice is taken it is too often not made sufficiently clear beforehand exactly which of the arrangements is being entered into, and the position is not properly protected if the house is to be shared with a partner or friends. It is vital that the legal position is fully documented in order to secure BoMaD's interests and to allow all parties to know where they stand.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.