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Have you helped your adult child to buy their property? If you
have, you are one of a growing number of parents who do so.
According to MSN Money, the average price parents are prepared
to contribute to their child's first home is £21,314.
But what happens to your investment if your child lives with
someone or gets married and then that relationship breaks down?
There is a risk that you could lose your investment.
loans
In January 2008, the Times reported on a recent High Court case.
Ms P and Mr LB were an unmarried couple, Mr LB's parents gave them
£200,000 with which to buy a new home. When Ms P and Mr LB decided
to separate, the house was sold and realised just under £100,000.
The judge awarded Mr LB's parents £50,000 of this.
At the time of purchasing the property, Mr LB was getting
divorced, and he and Ms P decided that the new property would be
put in her sole name, in an attempt to prevent Mr LB's wife from
trying to make a claim against it.
Mr LB's parents relied on an ambiguous letter as evidence of
their investment in the property and maintained that the £200,000
had been a loan and, as such, Ms P needed to pay it back. The judge
did not accept this.
In another case, an elderly gentleman gave all of his savings to
his son and daughter-in-law so that they could purchase a home in
which he could live with them. However, the son and daughter-in-law
then got divorced. The elderly gentleman intervened in the court
proceedings but the judge decided that he was not entitled to have
his savings paid back to him.
transfers of property
Where a father purchases a property in the name of his child,
the law presumes that the father is making a gift of the property
to the child unless there is evidence to the contrary. Curiously,
the law treats transfers between mothers and their children
differently in that in this situation there is no presumption that
these are gifts.
There is a question as to whether this presumption continues
when the child grows up. This issue has not been tested by the UK
courts but there has been a recent case in Canada which decided
that, once a child becomes an adult, there is a legal presumption
that a transfer of property made by a father was not meant as a
gift but rather that the grown up child holds the property on trust
for his father.
The above cases highlight how important it is to have clear
evidence of all parties' intentions at the time the loan or
transfer is made. If you have helped your child buy their property,
or are planning to, you need to have a legally binding document
drawn up which clearly sets out the arrangement. Such a document
(known as a Declaration of Trust) can assist in preventing
unnecessary and protracted legal arguments and often substantial
costs at a later date.
Kate
Chesters is a solicitor in the Family team of Blake Lapthorn,
Winchester. She can be contacted on 01962 844440.
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