Parents are increasingly having to get involved with their children’s divorce. Perhaps it is one aspect of the recession that parents are needed, not just as a shoulder to cry on but to provide financial support. This can take the form of paying the legal fees or more often lending money (perhaps that should be advancing the inheritance) to enable their child to either remain in the matrimonial home on divorce or to purchase an alternative property. I do not think that many parents planned to have to financially support their offspring through a divorce but, speaking as a divorce lawyer, it is always wise to consider the possibility (however remote) that your child might be involved in a divorce if you are thinking of giving them substantial sums of money when they get married towards a house purchase.
If for instance you want to help a child buy their first house, if they are buying it with a partner or a spouse, do make sure that your gift is protected by way of a charge on the property so that it is clearly a loan rather than a gift. Thus if something does go wrong and the parties separate you can at least recover your loan whereas you could not recover a gift. You are then free to a re-loan/re-gift that money at a later date to the same child.
If any money is gifted, should the parties get divorced, that money is in effect lost whereas if it is a loan it is repayable and you can recover it.
On a more positive note if you are seeking to help the child purchase a property, the Woolwich has just launched a new mortgage product enabling buyers to purchase a property with financial support from their parents or other family members. This is perhaps a much needed recognition of the increasing role that parents are playing in financing properties for their children, whether it is because of initial difficulties getting on the property market or as some form of rescue as a result of divorce.
The mortgage comes in two parts whereby the borrower takes out a family spring board mortgage and pays a deposit of 5% of the purchasing price and then the family member or helper opens a helpful start account into which they deposit a further 10% of the purchase price. The account is then locked down for a period of three years and provided the repayments on the mortgage have been maintained during that time, the funds are then released to the helper together with interest once the three years is up.
The helper is not responsible for maintaining the mortgage payments and has no rights over the property so they may lose all or some of their funds if the mortgage repayments are not maintained. It may be possible to protect this by way of a second charge although lenders are notoriously wary of this as it impacts on their security.
If you require any further information in relation to these matters please do not hesitate to contact our offices by telephone on 01608 686 590 or by email to firstname.lastname@example.org or visit our website at www.cotswoldfamilylaw.co.uk.