18th September, 2019
Protecting Your Interest in Your Children’s Homes
It is far from unusual for parents to give their children a helping hand to get on the property ladder when buying their first home.
In fact the latest figures from a survey by Legal and General show that the highest levels of parent funded contributions were recorded this year at an average of £24,100, with those numbers continuing to rise.
When compared with the UK’s largest banks, this ranks parents the 10th highest lender, funding £6.3 billion collectively.
Parents are financing these investments for their children by drawing on their own savings, withdrawing from their pension funds or even taking out debt in their own name.
Often the cash injections are handed over to the children simply in good faith without any legal structure considered. The contributions may be exchanged with their own personal stipulations, perhaps being a gift, a short or long term loan or other terms of repayment being agreed informally between the parent and child. Without the legalities surrounding these sums of money being clarified, it can result in a legal tangle further down the line.
In many cases the money will be invested in properties that are purchased by joint owners, perhaps by the child and their partner. They may or may not be married. If the child later separates, clawing back those contributions can be very difficult or impossible for the parents.
We are often faced with advising clients who have taken large sums of their own savings or other resources set aside for their future to help fund investments for their children. When dealing with a legal dispute following a separation, parents often suffer the consequences as they find that their contribution has been lost.
Other cases can involve the parents themselves separating and then seeking to include those funds already handed over in their own matrimonial pot. Without a clear understanding of the ownership of those funds it adds further uncertainty in their own divorce or separation.
When handing over sums of money, even when it is on terms between family members, it is imperative to ensure that the arrangements are formalised. There are a number or legal agreements that can be entered into to protect the return of those funds or clarify the legal terms of the contributions. Declarations of Trust, Pre -nuptial and Post-nuptial agreements are some of the mechanisms available to give legal clarity to the terms of the funding.
Planning for the unexpected is key and prevents heartache or lost cash down the line. Taking specialised legal advice ensures that you can help your child with the money they need, but makes certain that it is protected in the best way with tailor made agreements for your own circumstances.
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