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Beware the “bank of mum and dad”

These are increasingly challenging times for families.

Rising interest rates and inflation, along with wage stagnation and recent property prices, have collectively put greater pressure on parents to help their children purchase a home. This trend is commonly referred to as the “bank of mum and dad”.

But what happens if you have loaned or gifted money to your offspring and their relationship breaks down?

There are some important legal issues to consider when it comes to property disputes.

Ideally, a financial gift should form part of the property pool to be divided between your child and their spouse/partner. However, there is no guarantee they will receive the full benefit and this can, understandably, greatly upset parents.

When money is loaned to a child it’s expected repayments will be made. Preferably, any money or property loaned should not form part of the assets pool to be divided between the child and their spouse/partner, with any such debt to be repaid before remaining assets are adjusted between the dividing couple.

Add additional concerns around the future financial welfare of any grandchildren involved and the solution is simple: be prepared by seeking good legal guidance.

Get all paperwork in order before you undertake gifting or loaning money to your children.

Make sure you are sure on your intentions regarding any conditions and keep clear and unambiguous documentation in a safe place.

As a family lawyer with over 40 years’ experience, I have unfortunately seen many bitter and costly relationship breakdown and property disputes stemming from unclear recollections about what was said to whom, where and when.

Liability limited by a scheme approved under Professional Standards Legislation

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