FAMILY MATTERS

I contributed to my child’s house deposit and they are getting divorced: what happens to my money now?

Getting onto the property market is as hard as it’s ever been, so it’s no surprise that parents are often keen to help their children secure their first home.

The most common way of doing this is by making a contribution towards the deposit – usually quite a substantial one.

But what happens if your child gets divorced? Can you ensure that your financial contribution remains with your child rather than being divided between the divorcing couple?

Caroline Yorke, a family law specialist at Lanyon Bowdler Solicitors, says action needs to be taken at the time of the property purchase to avoid any unwanted complications.

“On many occasions we are faced with a situation where a client says their parent provided money to purchase the marital home and we have to deliver the bad news that, unless something was done at the time to protect that sum of money for the parent, it may well be regarded as having been a gift,” she explains.

“As such, it will be absorbed into the marital assets and could be awarded in whole or in part to the other spouse. The basic position is that, within divorce proceedings, the court must take all the marital assets into account and divide them so as to produce a fair result for the couple, taking account of various factors such as the existence of children, each spouse’s financial needs and resources, their age, health and so on.

“Crucially, the law does not require the court to consider fairness to the parents who might have provided part of those assets. So if you are considering helping out your married child financially it is very sensible to take legal advice to ensure your circumstances are protected as far as possible. You could consider adding your name to the title deeds to reflect the funds you contributed, or if the money is regarded as a loan, should a formal loan agreement be drawn up setting out the repayment terms and interest?

“Perhaps your child and their spouse could agree to enter into a pre-nuptial or post-nuptial agreement to try to ensure that your child retains your funds if the marriage breaks down?

“If you still wish to provide the money on an informal basis, how will this be recorded by the solicitors dealing with the purchase and to what extent will your name and the arrangements be referred to in their file and on bank documents?

“All of these options will have important ramifications, such as tax and inheritance, and you should take legal advice in good time before providing the funds. Ultimately, a little thought and investment at an early stage could protect you against potentially having to intervene in divorce proceedings further down the line, at considerable cost, risk and disruption to yourself and the wider family.” n

Lanyon Bowdler’s offices are in Conwy and the firm assists individuals and businesses across North Wales. For more information, visit www.lblaw.co.uk or call 01492 557070.