Bank of Mum and Dad - What rights do you have if your child divorces?

The Bank of Mum and Dad – what rights do you have if your child divorces? Part 1

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Many parents help their children to get a foot on the property ladder if they have the ability to do so. The long-term legal implications of this though are rarely thought about. ‘It’s family, right?’…. so, no need to worry about anything going wrong?

At the risk of coming across as a cynical lawyer; things do, far too often, go wrong and I hope by sharing some of the difficulties that can arise it will assist families to take preventative measures, save costs and avoid ending up in bitter legal battles.

What problems can arise?

If you have provided your child with money to help them purchase their home and they are married (or later gets married) and then the marriage breaks down, complications can arise.

Is it clear what your intention was in respect of the money? Was the money a gift? Was the money a loan? Was it meant to be just for your child’s benefit or was it provided for the benefit of your child and partner as their family home, which possibly may house your grandchildren?

If you have lent your child a sum of money and years later they divorce, you may well be wondering who will get that money in the divorce proceedings. Even if you are not concerned with taking the money back yourselves, many parents will understandably want to ensure that their child retains that money and not their ex-partner.

In family law there is a wide range of discretion when determining how assets should be divided up in the event of a divorce. What is in the ‘pot’ for division can be very difficult to determine if there is no clearly evidenced form of intention.

Even if it can be established that money provided from you was to be paid back, the court may well regard it as a ‘soft loan’, unless there is clear evidence to the contrary. If it is regarded as a soft loan, less consideration (‘weight’), if any, will be given to it when working out a financial settlement between your child and their ex-partner.

It is not necessarily always as straightforward as simply looking at the terms of the legal ownership of the property or the financial contributions that were made towards the property. Often the starting point is 50/50 regardless, but there is no formulaic approach and each case is dependent on its own facts. Under family law there is the power to adjust the interest that each spouse may have in a property, taking assets from one spouse and giving to the other. So, just because one party ‘put in’ more money, it doesn’t mean that they would get the exact sum back upon divorce – and vice versa. Ultimately the needs of both the spouses, and any children they may have, must be met from the terms of any financial settlement based on the resources available.

If your child and the spouse they are separating from ends up in court proceedings you may need to become involved – that is becoming a party to those proceedings, or be invited to join / intervene. I will cover this scenario in part 2 of this blog series.

Preventative measures:

There are preventative measures that can be taken to try and prevent difficulties arising. They involve being clear, and transparent, as to the terms under which you have given your child money.

The key is to have clear documented evidence to support the ‘intention’ behind the money that you have provided.

Some options to consider include:

  • Having a cohabitation agreement between your child and their partner before they get married;
  • a declaration of trust;
  • encouraging your child to enter into a pre-nuptial agreement prior to marriage and/or a post nuptial agreement after the marriage;
  • a legal charge registered on the property;
  • a formal loan agreement.

There are pros and cons with each of the above and specific, tailor made legal advice should be sought to ensure the best option is put in place after considering your individual circumstances.

11 responses on “The Bank of Mum and Dad – what rights do you have if your child divorces? Part 1

  1. Matrimonial home was purchased in 2016. Purchase price of 172k met by mortgage of 119k & loan from parents to son for 53k. Formal loan agreement was signed/witnessed by parents & son & stated clearly that loan would require repayment if property was sold. Son?s wife was told at the time this was a loan to her husband so her signature not needed. The property & mortgage is in joint names. Marriage has broken down & property up for sale. Does the loan require repayment before any other free proceeds are divided up.

    1. Potentially yes, but it would be dependent upon the specific facts of the case – a review of the loan agreement together with any other supporting evidence and the overall circumstances of the case would be needed to advise as there is a wide range of discretion in family law when determining how assets should be divided up in the event of a divorce and sometimes money provide by family can be regarded as a ?soft loan? with less weight being attached to it when working out a financial settlement between the spouses.

  2. If you borrow from your parents and your wife asks for them to ?let us off the repayments?, which is 16% of the purchase price outStanding, would that be considered as 16% of the settlement value of the property?

    1. A lot more information and detail would be needed about the specific circumstances of your case in order to advise on the settlement value of the property. Specific advice would be beyond the scope of a blog post comment. You should seek legal advice from a specialist family law lawyer, you can arrange a consultation with one of our team by calling 01273 646900

  3. I?m now divorced but my ex husbands mum bought him a house while we was married, am I entitled to half his house for our children

    1. We would need to know a lot more information and detail about your circumstances in order to answer your question, in any event though specific legal advice is beyond the scope of a blog post comment. You should seek legal advice as it sounds like you have potential financial claims that you need to sort out as a result of the divorce. If you would like to arrange a consultation with one of our specialist lawyers please call 01273 646900.

  4. My daughter’s marriage has broken down but he will not leave until he has received his share of the house. We are happy to give/loan her some money to get him to leave but is this the right thing to do before their divorce? Would it be safer to enter into a joint mortgage with my daughter?

    1. We would need to know a lot more about the details of the situation in order to provide information about the options available. There will be pros and cons of each option that will need to be weighed up in light of the specific circumstances. Your daughter should seek advice from a family law specialist with regards to the terms of the overall divorce financial settlement and any advance payment. You should also seek your own independent legal advice with regards to how any monies you may provide can be protected.

  5. We would need to know a lot more about the details of the situation in order to provide information about the options available. There will be pros and cons of each option that will need to be weighed up in light of the specific circumstances. Your daughter should seek advice from a family law specialist with regards to the terms of the overall divorce financial settlement and any advance payment. You should also seek your own independent legal advice with regards to how any monies you may provide can be protected.

    1. My wife and I are divorcing, we have an 18month old that will live with his mum.
      We are going to sell the house and there is £400k equity.
      I have offered a 60/40 split to her so she can buy a house and I will pay not only child maintenance of £450 but also £200 as spousal support to help her with the bills until she gets a job.
      She says £240k doesn’t get her a good house and wants more.
      I eel £240k gets her a good sized 2 bed house, if she wants bigger, her mum can contribute and help her with bills ( I withdraw my £200)
      She has always wanted to live with her mum (part of reason we broke up), and her mum can contribute £50k, live together and her mum helps with the bills.
      I don’t like her mum, and feel £240k gets her a good sized 2 bed house, if she wants bigger, her mum can contribute and help her with bills ( I withdraw my £200)
      Would the courts really say £240k isn’t enough and she needs more, even though she has nonl income and can’t pay the bills?

    2. There is a wide range of discretion in the law when working out how assets should be divided in the event of a divorce. All the circumstances of a case have to be considered and the first consideration is given to the welfare of any children of the family under the age of 18. In particular, you have to pay regard to the following:
      a) The income, earning capacity, property and other financial resources which each spouse has or is likely to have in the foreseeable future including, in the case of earning capacity, any increase in that capacity which would be in the opinion of the Court reasonable to expect a person to take steps to acquire.
      b) The financial needs, obligations and responsibilities which each spouse has or is likely to have in the foreseeable future.
      c) The standard of living enjoyed by the family before the breakdown of the marriage.
      d) The ages of each spouse and the duration of the marriage.
      e) Any physical and mental disability of each spouse.
      f) Contributions which each spouse has made or is likely to make in the foreseeable future to the welfare of the family, including any contribution by looking after the home or caring for the family.
      g) The conduct of each spouse, if that conduct is such that it would be in the opinion of the Court to be inequitable to disregard.
      h) The value to each spouse of any benefit which one spouse because of divorce will lose his chance of acquiring (most usually pension provision).

      Every case is different. There is not a ‘one size fits all’ approach. The aim of the court when approving any financial settlement and making it legally binding is to achieve fairness. A key factor will be the needs of the spouses and the children, a divorce financial settlement has to ensure those needs can be met. The costs of suitable properties to live in and mortgage capacity has to be looked at to work out housing needs.

      You can work out child maintenance online at https://www.gov.uk/calculate-child-maintenance.

      Spousal maintenance is payable to help a spouse adjust to any undue hardship caused by the marriage coming to an end, both spouses incomes and outgoings need to be analysed to work out whether spousal maintenance is payable and if so at what rate and for how long. Specific advice on your circumstances is beyond the scope of a blog post comment. You should seek legal advice, you can contact Family Law Partners on 01273 646900 to arrange a consultation with one of our specialist lawyers.

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