The “Bank of Mum and Dad” is set to advance £6.5 billion this year to help their children buy a home, making it the UK’s 9th biggest lender. Overall this kind of financing will be involved in 26 per cent of all property transactions in the UK this year. Furthermore, the amounts parents are having to lend has increased on average from £17,500 to £21,600. As prices increase and lenders demand higher deposits this figure is set to increase further.
Often when funds are provided as an investment or loan to your child and/or their Partner or Wife there is no contemplation that the relationship might fail. The “what if the relationship or marriage fails” is not a consideration. Sadly IT SHOULD BE as there could be significant financial consequences in the event of a relationship breakdown.
Often, in divorce cases, a third party’s interest can be forgotten or misinterpreted by another party and the Court treats these arrangements as “soft loans” disregarding them unless supported with cogent evidence that the funds were a loan/investment. This results in the “Bank of Mum and Dad” being unable to recover its loan/investment and it has to be written off.
There are, of course, ways to protect the money prior to it being paid such as, for example, a formal Loan Agreement or a Declaration of Trust.
If your child is involved in separation or divorce proceedings and the loan is disputed then the parents/grandparents need to act quickly to protect their position. You may be surprised to learn that you can actually apply to intervene in the divorce proceedings so that your voice is heard and you are given the opportunity to set out your case as to your interest in the property or asset in dispute.
If you are contemplating making an investment or loan or your children are involved in separation/divorce proceedings in which the loan/investment is in dispute then it is worthwhile you meeting our Head of Family Law, Simon Gummer, for an initial assessment of your circumstances. He will see you for a free half hour meeting to discuss your options and the consequences of the decisions you make.
Contact him on 01638 560556; email: firstname.lastname@example.org