With mortgages so hard to come by parents increasingly provide financial support to their children as they enter adulthood. Most commonly this is done by parents in anticipation of the marriage of a child to assist in the purchase of their child’s and their intended’s new matrimonial home.
It’s a loving gesture and no one wants to assume the worst but it is a reality that relationships do break down. Rachel Spencer Robb, Family Law Solicitor at awarding winning law firm Last Cawthra Feather looks into at this increasingly common issue.
With nothing in writing setting out what the position should be the funds derived from the hard work of parents will be pooled with all other assets of their divorcing child and their spouse.
What steps have been taken to protect the funds against a potential claim in divorce proceedings or claim from a cohabitee? Is it the case that funds were truly gifted with no recourse if the relationship breaks down? Or is it that parents would prefer some protection against the claim that a spouse or partner might have over their child’s ‘inheritance’?
So, what should be done?
Rachel advises “Consideration should be given at the outset as to whether the funds are to be a loan or a gift. If funds are to be loaned, there should be an agreement in writing”
“The more formal the loan agreement (or indeed any document between family members) the more it is likely to have weight in the Court and be less open to criticism as a “soft loan” and not one that should be repaid” Rachel adds.
Even if funds are to be given, parents may want to protect those funds for their own child against any potential claim. The money can be placed in trust for the benefit of their child but with certain terms that the money (or what is left) reverts to the parent in specific circumstances.
Rachel goes on to say “There is no such thing as a “common law” spouse and therefore any breakdown of an unmarried relationship is subject to trust law, property law and what each of the parties remembered about who said what to whom about the interest in the property they purchased together. Not usually the stuff of romantic chats by the fire!”
“It is always preferable to seek legal advice about cohabitation and pre-nuptial agreements to ensure that control is kept over family wealth, particularly where it is being handed down through generations. You work hard to get to a level of comfortable living and want your children to do the same. Make sure that all steps are taken to clarify what you want to happen both in life and death to preserve wealth for your family.” she concludes
Rachel Spencer Robb is a Family Law Solicitor at LCF’s Ilkley Office. Rachel has 12 years experience in specialising in family law, advising mid to high net worth clients in any legal aspect of their family relationships. Rachel is an accredited specialist of Resolution
For further information on the above issues please visit www.lcf.co.uk or alternatively contact Rachel on 01274 848800 or via email enquiries@lcf.co.uk
